accounting ch 2

Assets

Choice, Resources owned or controlled by the business Resources owned or controlled by the business

Pintel Company paid $2,000 cash for a 12 month insurance policy. Describe how to record the transaction to the T-accounts by completing the following sentence. Cash would be (debited/credited)__________ on the (left/right)_________ side of the T-account, and Prepaid Insurance would be (debited/credited)________ on the (left/right)_________ side of the T-account.

credited, right, debited, left

Select the statement below that best defines prepaid accounts. Multiple choice question.

Prepaid accounts are assets that represent prepayments of future expenses.

Which of the following are examples of prepaid (expense) accounts? (Check all that apply.)

Prepaid rent Prepaid insurance

Which of the following lists of items contain only examples of prepaid (expense) accounts? Multiple choice question. Prepaid insurance, unearned revenue, prepaid accounts payable Prepaid rent, prepaid land Prepaid rent, prepaid insurance Prepaid insurance, prepaid accounts receivable, prepaid land

Prepaid rent, prepaid insurance

Which of the following statements about revenues is correct?

Revenues cause equity to increase, and they are increased on the right side of the accounting equation.

The business earns $2,800 cash for services performed. How would this receipt affect the total equity of a business?

Revenues would be increased, so equity is increased.

revenues

Sales of products and services to customers

On Nov.1, Lyons Company pays $2,400 cash for supplies. Show how to use T-accounts to record this transaction by selecting the correct answer below. Multiple choice question.

Supplies would be debited, and Cash would be credited.

Notes receivable is considered a(n) (asset/liability)________.

asset

Equipment is a(n) (asset/liability/expense)__________ account. It is reported on the (left/right)_________ side of the accounting equation and is (increased/decreased)__________ when equipment is purchased.

asset, left, increased

When financial statements are prepared, unexpired prepaid accounts are recorded as (expenses/assets/liabilities)_______ and the expired portion of the prepaid account is reported as a(n) (expense/asset/liability)________.

assets, expense

The expanded accounting equation is: = __________ + ___________ common stock + __________ - __________ - dividends.

assets, liabilities, revenues or revenue, expenses

The account title is shown at the top of a T-account. The left side of a T-account is called the _________ side, and the right side is called the ________ side.

debit, credit

True or false: Assets are claims (by creditors) against the company

false

True or false: The revenue recognition principle states that revenue should be recorded in the period in which it is earned which may or may not be the period in which payment was actually received.

true

The rules of double-entry accounting say that for each transaction at least ________ accounts are involved, with at least one debit and one________

two, credit

Sunshine Company received and paid for a utility bill of $50. Show how to record this transaction to the T-accounts by selecting the correct answer below.

$50 on left side of the Utility expense account; $50 on the right side of the Cash account.

Which statement best describes a T-account?

A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions.

Choose the account(s) below, that would have a normal credit balance. (Check all that apply). Multiple select question. Common Stock Revenues Accounts Payable Unearned Revenues Supplies Expense

Common Stock Revenues Accounts Payable Unearned Revenues

Jeff, the owner of a business, invests an additional $100 into his business. How would this affect the equity of his business? Multiple choice question.

Common Stock would be increased and total equity would also increase.

The steps in the accounting process include: Identify transactions and source documents Analyze transactions Record business transactions Determine management's responsibilities Identify employees to be fired

Identify transactions and source documents Analyze transactions Record business transactions

Which of the following are examples of prepaid (expense) accounts? (Check all that apply.) Multiple select question. Prepaid rent Prepaid insurance Prepaid dividends Prepaid accounts payable Prepaid buildings

Prepaid rent Prepaid insurance

Holt Computer Services purchased $2,000 of new equipment and paid immediately. Illustrate how to record the transaction into T-accounts of Holt Services by completing the following sentence. The Equipment account would be (debited/credited) ___________ on the (left/right) ___________ side of the T-account and the Cash account would be (debited/credited) ___________ on the (left/right) __________ side of the T-account.

debited, left, credited, right

An account is a record of increases and ________ in a specific asset, liability, equity, revenue or expense.

decreases

The Dividends account is used to record (investments/dividends/expenses/revenues)____________ paid to the owners and has a (positive/negative)__________ impact on equity.

dividends, negative

True or false: The cost of land owned by a business is recorded in the Land account and this account is classified as an expense

false

Accrued liabilities are amounts owed that are not yet______

paid

True or false: At the end of the period, the assets will still equal the liabilities plus equity.

true

Which of the following is a correct statement regarding the posting process?

Entries must be posted to the ledger before financial statements are prepared.

Which of the following describes a general ledger?

The general ledger is a record containing all accounts used by a company.

Liabilities

The obligations owed by the business to creditors

Which of the following statements best describes the purpose of the Owner, Capital account?

When an owner invests in a business, the invested amount is recorded in the Common Stock account

Dollar signs are _____ in journals and ledgers. Multiple choice question.

not used

When the product or service related to an unearned revenue is delivered, the earned portion of the unearned revenue is transferred to a _____ account.

revenue

Which of the following statements is the correct definition of a creditor?

A creditor is an individual or organization that has a right to receive payments from a business.

Which of the following statements is correct in regards to debiting and crediting an account? Multiple choice question.

A debit or a credit can increase an account, depending on what kind of account it is.

Which of the following statements is the correct definition of a liability?

A liability is a claim by a creditor against the assets of a business.

Which of the following statements is (are) correct regarding the definition of a liability? (Check all that apply.) Multiple select question. A liability is a thing of value owned by the business and is increased on the left side of a T-account. A liability is an asset waiting to be received by a business. A liability is a debt owed by the business. A liability is a claim by creditors against the assets of a business. A liability can be settled by transferring assets or providing products or services to others.

A liability is a debt owed by the business. A liability is a claim by creditors against the assets of a business. A liability can be settled by transferring assets or providing products or services to others.

In defining a reporting period, which of the following statements is (are) correct? A reporting period is used to determine the due date of payables. A one-year reporting period is known as the fiscal year. A reporting period can be one month, one quarter or one year. A reporting period refers to each day in the calendar year. A reporting period is determined by the business.

A one-year reporting period is known as the fiscal year. A reporting period can be one month, one quarter or one year. A reporting period is determined by the business.

Which of the following is the best definition of a source document in the accounting process?

A source document identifies and describes transactions and is the basis for entering an event into the accounting system.

Which of the following statements is accurate regarding Accounts payable?

Accounts payable refer to promises to pay later, which may arise from the purchase of supplies or services.

Which statement is correct regarding entering transactions into the accounting equation? Multiple choice question.

After recording a transaction, the total of the right side of the accounting equation must equal the total of the left side of the accounting equation.

The stockholders of a business received a $1000 dividend. How would this affect the total equity of the business? Multiple choice question.

Assets would be decreased and total equity would decrease as well.

Which of the statements below is true regarding the statement of retained earnings?

Both the beginning and ending retained earnings balances are reported on the statement.

Which of the following accounts has a normal debit balance? Accounts payable Cash Unearned revenue Accounts receivable Supplies Buildings

Cash Accounts receivable Supplies Buildings

Which of the following items is (are) required in the heading of every financial statement? Address of the business Date or period of time covered Name of the business "Prepared-by" or signature line Phone number of the business Name of the financial statement

Date or period of time covered Name of the business Name of the financial statement

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit Cash; credit Common stock

Which of the following statements is the correct definition of equity? Multiple choice question.

Equity is the owner's claim on a company's assets.

Which of the following statements is correct regarding expenses.

Expenses are increased on the left side of their T-account because they decrease equity.

Which of the following statements is correct regarding the effect of debits and credits in accounts?

Expenses reduce equity, so to increase an expense account you would debit it.

Which set of accounts below would have a normal debit balance?

Expenses; Dividends; Cash

Which of the following statements explains the difference between a Balance column account and a T-account?

T-accounts are a simple way to visualize the effect of a transaction; however, Balance column accounts are used in actual accounting systems.

Recall that the Balance Sheet reports the equality of the accounting equation and would include which of the following amounts? Total Assets Retained earnings balance at end of period Net Income (Loss) Total Expenses Dividends Total Revenues Retained earnings balance at the beginning of the period Total Liabilities

Total Assets Retained earnings balance at end of period Total Liabilities

Which of the following statements are accurate regarding supplies? Unused supplies are treated as expenses. Unused supplies are treated as assets. When supplies are purchased, they are added to the Supplies account. Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies. Supplies is considered a liability account. Supplies are assets until they are used.

Unused supplies are treated as assets. When supplies are purchased, they are added to the Supplies account. Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies. Supplies are assets until they are used.

The general ledger can be used to determine which of the following (select all answers which apply): Multiple select question. a complete record of each transaction in one account. common and unique accounts used by a business. which accounts are being used by a company and their balances at any given time. increases and decreases in all accounts in a business.

common and unique accounts used by a business. which accounts are being used by a company and their balances at any given time. increases and decreases in all accounts in a business.

Brown Company purchased $900 of supplies on credit. Illustrate how to record the transaction to T-accounts by completing the following sentence. Accounts payable would be (debited,/credited)_________ on the (left/right)________ side of the T-account, and Supplies would be (debited/credited)_________ on the (left/right)________ side of the T-account.

credit, right, debit, left

You are entering a transaction in the journal. Place the following steps in the order that they would be entered in the journal.

date debit credit explanation

The T- account for Cash had 3 transactions entered into it. It was increased by $400 and decreased by $100 and by $30, respectively. Its balance at the end of the period would be a (debit/credit)_________ balance of $________

debit, 270

On Jan. 2, Callie Company received a $700 payment from a customer previously billed for services performed. The journal entry to record this transaction would include a (debit, credit) __________ to the _________ account and a (debit, credit)_________ to the Accounts Receivable account.

debit, cash, credit

List the steps in processing transactions in the correct order.

identify transactions and source documents Analyze transactions using the accounting equation record journal entry post entry to ledger

A posting reference in a (journal/ledger)__________ includes the page number of the account debited or credited in the (journal/ledger)_________ and serves as a link to cross-reference the transaction from one record to another.

ledger, journal

A trial balance is a(n) (list/balance/chart) __________ of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of _________ account balances. Use one word for each blank.

list, credit

Choose the account(s) below, that would have a normal credit balance. dividends revenues expenses unearned revenues common stock accounts payable

revenues unearned revenues common stock accounts payable

Analyzing the accounting equation at the end of the month will reveal the following. Select all that apply. revenues and expenses will change the equity account assets = liabilities + equity assets and liabilities will be reported on the income statement increases and decreases in cash will be reported on the balance sheet

revenues and expenses will change the equity account assets = liabilities + equity

An efficient way to search for an error causing the trial balance to not be in balance is to check the journalizing, posting, and trial balance preparation in _________ order.

reverse

Financial statements are prepared from a(n)

trial balance

Given the following information for Jackson's Boots, calculate its Debt Ratio for the current year. Total assets- $250 Total liabilities- $100 Total equity- $150

.40

Which of the following statements is (are) correct? Crediting the Common Stock account means to increase it. Crediting a liability account will increase it. Crediting means to enter transactions on the left side of a T-account. Crediting means to enter transactions on the right side of a T-account.

Crediting the Common Stock account means to increase it. Crediting a liability account will increase it. Crediting means to enter transactions on the right side of a T-account

Which of the following accounts impact equity? (Check all that apply.) Multiple select question. Dividends Expenses Liabilities Common Stock Assets Revenue

Dividends Expenses Common Stock Revenue

Which of the following would be included on a statement of retained earnings? (Check all that apply.) Multiple select question. Dividends Total assets Common stock Total revenues Retained earnings balance at end of period Net income (loss) Retained earnings balance at beginning of period Total liabilities

Dividends Retained earnings balance at end of period Net income (loss) Retained earnings balance at beginning of period

Describe where dollar signs are appropriate in financial statements.

Dollar signs are used beside the first and last numbers in a column.

Which of the following statements is (are) correct regarding the posting process? (Check all that apply.) Multiple select question. Entries are posted as soon as possible. Posting is only required at the end of the year. The posting process creates a link between the ledger and the journal. The posting process does not require detailed explanations in the ledger. The journal page is entered in the posting reference column of the journal. Entries must be posted to the ledger before financial statements are prepared.

Entries are posted as soon as possible. The posting process creates a link between the ledger and the journal. The posting process does not require detailed explanations in the ledger. Entries must be posted to the ledger before financial statements are prepared.

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt. If a company has a lot of debt, they may not be able to afford to take on new debt. A company's required debt payments may be greater than its ability to generate money to make those payments. Assessing a company's risk of paying off debt is not required when the company is highly leveraged. A company that finances their assets by borrowing will need to make enough money to pay off the debt.

If a company has a lot of debt, they may not be able to afford to take on new debt. A company's required debt payments may be greater than its ability to generate money to make those payments. A company that finances their assets by borrowing will need to make enough money to pay off the debt.

Which of the following statements is correct about prepaid accounts Multiple choice question.

Prepaid accounts are also called prepaid expenses and are considered assets.

When entering transactions into accounts, the rules of double-entry accounting must be followed. These rules include: There must be at least one credit and one debit. The accounting equation must remain in balance. The total number of accounts debited must equal the total number of accounts credited. The total amount debited must equal the total amount credited.

There must be at least one credit and one debit. The accounting equation must remain in balance. The total amount debited must equal the total amount credited.

Which of the following statements is (are) correct regarding the effect of debiting or crediting accounts? To increase a revenue account, you would debit it. To reduce Cash, you would credit it. To increase the Withdrawals account, you would debit it. To increase the Owner, Capital account you would debit it. To decrease an asset, you would credit it. To increase an expense account, you would debit it. To reduce Accounts payable, you would debit it

To reduce Cash, you would credit it. To increase the Withdrawals account, you would debit it. To decrease an asset, you would credit it. To increase an expense account, you would debit it. To reduce Accounts payable, you would debit it

identify which of the following formulas correctly defines how to calculate the debt ratio.

Total liabilities/Total assets

Name the accounting document or report that is completed just prior to preparing financial statements and assists in preparing the financial statements.

Trial balance

The T-account for Accounts payable had 4 transactions entered into it. It was increased by $300 and by $100 and decreased by $50 and by $150, respectively. Its balance at the end of the period would be a (debit/credit)__________ balance of $___________.

credit, 200

Holt Computer Services received $200 from a customer that it had billed earlier in the month. Illustrate how to record the transaction to the T-accounts by completing the following sentence. Accounts receivable would be (debited/credited)____________ on the (left/right)_________ side of the T-account, and Cash would be (debited/credited)_________ on the (left/right)________ side of the T-account.

credit, right, debit, left

On Jan. 2, Callie Company performed $800 worth of services for a client. The client paid $100 immediately, but promised to pay the balance next month. The journal entry to record this transaction in Callie Company's books would include a (debit/credit)__________ to the Cash account; a (debit/credit)_________ to the Accounts receivable account and a (debit/credit)________ to the Service revenue account.

debit, debit, credit

Since expenses are the costs of doing business and cause equity to (increase/decrease)_________, expenses are increased on the (right/left)__________ side of their T-account.

decrease, left

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) (increase/decrease)_______ in total liabilities and (equity/assets)_______

increase, equity

The Notes payable account is a(n) (asset/liability/expense)_______ account and is increased on the (left/right)________ side of the T-account.

liability, right

An income statement reports:

the revenues less the expenses incurred by a business

Which of the following financial statements reports the financial position of a business at a point in time?

Balance sheet

Which of the following is required information when entering a transaction into a journal? Explanation of transaction Initials of person entering the transaction Debited accounts Date of the transaction Credited accounts

Explanation of transaction Debited accounts Date of the transaction Credited accounts

Select the statement below that best defines prepaid accounts.

Prepaid accounts are assets that represent prepayments of future expenses.

The Building account is a(n) (asset/liability/expense)__________ account and is reported on the (left/right)________ side of the accounting equation.

asset, left

Which of the following formulas is correct in depicting the expanded accounting equation? Multiple choice question.

Assets = Liabilities + Common stock - Dividends + Revenues - Expenses

Dividends of $50 are paid to the shareholders of a company. How would this affect the equity of a business?

Assets are decreased and equity is decreased.

Which of the following statements correctly explains how to prepare a trial balance? Compute the total of debit balances and the total of credit balances. Verify that the total debit balances equals the total credit balances. Total debit account balances do not have to equal total credit account balances in order for the financial statements to be prepared. List each account title and its amount from the ledger.

Compute the total of debit balances and the total of credit balances. Verify that the total debit balances equals the total credit balances. List each account title and its amount from the ledger.

Stan Programming Services provided $8,000 of services and received payment immediately. Show how to record this transaction to the T-accounts by selecting the correct answer below.

Enter $8,000 on left side of Cash; enter $8,000 on the right side of Service revenue.

Which of the following statements is (are) accurate regarding equipment purchased within a business? Equipment is an asset. Equipment is reported on the left side of the accounting equation. Equipment purchases are expensed, in their entirety, in the period in which they occur. Equipment cost is initially recorded as an asset and the cost is allocated over time to expense. Equipment purchases are reported on the balance sheet.

Equipment is an asset. Equipment is reported on the left side of the accounting equation. Equipment cost is initially recorded as an asset and the cost is allocated over time to expense. Equipment purchases are reported on the balance sheet.

The business receives and immediately pays a $300 advertising bill. How would this payment affect the total equity of a business?

Expenses would be increased, so equity is decreased.

Select the statements that are true regarding debiting and crediting. (Check all that apply.) Multiple select question. Crediting an account that exists on the right side of the accounting equation will reduce it. For an account where a debit is an increase, the credit is a decrease. A credit will always decrease an asset account. A debit or a credit can increase or decrease an account, depending on the account. A debit can increase an expense account.

For an account where a debit is an increase, the credit is a decrease. A credit will always decrease an asset account. A debit or a credit can increase or decrease an account, depending on the account. A debit can increase an expense account.

Which of the following statements is (are) correct regarding the Balance column in a ledger (or Balance column account)? (Check all that apply.) Multiple select question. Immediately after posting a transaction, the balance of the account is written in the Balance column. A zero balance for an account is usually shown by writing zeros or a dash in the balance column. An abnormal balance is identified by writing it in red or setting it in brackets. The amount of the debit or credit to the account is also entered in the Balance column of the ledger. It is not necessary to calculate the new balance of the account until the end of the period -- before financial statements are prepared.

Immediately after posting a transaction, the balance of the account is written in the Balance column. A zero balance for an account is usually shown by writing zeros or a dash in the balance column. An abnormal balance is identified by writing it in red or setting it in brackets.

From the lists of accounts below, which one contains only revenue accounts? Multiple choice question.

Interest revenue, Professional fees earned, Sales

Which of the following statements is the best definition of the Chart of Accounts?

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.

Which of the following statements is (are) true regarding the balance sheet? (Check all that apply.) Multiple select question. It reports the financial position at a point in time. It depicts the equality of the accounting equation. The report date is over a period of time. It lists the balances of revenues and expenses. The report date includes a single calendar day.

It reports the financial position at a point in time. It depicts the equality of the accounting equation. The report date includes a single calendar day.

Which of the following items would be considered "cash" and reflected in a company's Cash account? Money orders Checks Coins Notes Receivable Prepaid Insurance

Money orders Checks Coins

Which of the following statements are correct regarding how the financial statements are linked? Net Income from the income statement is carried to the statement of retained earnings. The ending balance in the retained earnings account is carried to the balance sheet. The ending balance in the retained earnings account is carried to the income statement. Total assets from the balance sheet is carried to the statement of retained earnings.

Net Income from the income statement is carried to the statement of retained earnings. The ending balance in the retained earnings account is carried to the balance sheet.

Which of the following statements is (are) correct regarding the Notes payable account? Notes payable is a liability account. Notes payable is reported on the balance sheet. Notes payable is an asset account. Notes payable is increased on the left side of the T-account. Notes payable is a written promise to pay a future amount.

Notes payable is a liability account. Notes payable is reported on the balance sheet. Notes payable is a written promise to pay a future amount.

Gunner Company made a $50 payment on account for a previous equipment purchase. Show how this transaction should be entered into T-accounts of Gunner Company, by selecting the correct answer below.

Place $50 on left side of the Accounts payable account; place $50 on the right side of the Cash account.

Minor Games received a $500 payment for services to be provided in the future. Show how this transaction should be entered into T-accounts of Minor Games, by selecting the correct answer below.

Place $500 on the left side of the Cash account; place $500 on the right side of the Unearned Revenue account.

Which of the following is correct regarding posting a transaction?

Posting means to transfer journal information to a ledger.

Which of the following statements is accurate about the Land account? The Land account is an expense account. The Land account is an asset. The Land account is increased on the left side of its T-account. The Land account records the costs of purchasing an office, warehouse or store. The Land account is used to record the costs of land purchased by the business.

The Land account is an asset. The Land account is increased on the left side of its T-account. The Land account is used to record the costs of land purchased by the business.

Equity

The residual interest in the assets of a business after deducting the business's debts

Which of the following statements is (are) correct regarding a journal? Entering transactions into a journal is called posting. A journal reports the balance of all the accounts in a business. Transactions are generally entered in chronological order. A journal is used to record business transactions. In a journal, both the debit and credit side of the transaction can be seen.

Transactions are generally entered in chronological order. A journal is used to record business transactions. In a journal, both the debit and credit side of the transaction can be seen.

Which of the following statements is (are) correct regarding unearned revenues? (Check all that apply.) Multiple select question. Unearned revenues are amounts owed by customers for services performed. Unearned revenue is a liability account which is set up when a customer pays in advance for a product or service. Unearned revenues refer to assets which have yet to be billed to customers for services performed by the business. Unearned revenues refer to a liability that is settled when a company delivers a product or performs a service.

Unearned revenue is a liability account which is set up when a customer pays in advance for a product or service. Unearned revenues refer to a liability that is settled when a company delivers a product or performs a service.