ACCT 211 Ch 2

Which of the following statements is (are) correct regarding a T-account?

-A T-account will show the debit and credit effects of transactions. -A T-account may be used as a tool to visualize the effects of a transaction. -A T-account represents a ledger account.

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt.

-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.

In defining a reporting period, which of the following statements is (are) correct?

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

An annual insurance policy is paid in advance by a company. How will the company treat this initial payment and the subsequent expiration of a portion of the policy over time?

-As a portion of the policy expires, the expired portion will be removed and transferred to an expense account. -Over time, the expired portion of the policy must be removed from the asset account as it has been used up and is no longer considered an asset. -The initial payment will be recorded as an increase to a Prepaid Insurance account.

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. -List each account title and its amount from the ledger.

Which of the following statements is (are) accurate regarding equipment purchased within a business?

-Equipment is reported on the left side of the accounting equation. -Equipment is an asset. -Equipment purchases are reported on the balance sheet. -Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed through the Accumulated Depreciation account.

Which of the following are accurate statements regarding how to report or treat prepaid accounts?

-The expired portion of prepaid accounts is reported on the income statement as an expense. -Over time, the expired portion of prepaid accounts is removed from the account and reported as an expense. -The unexpired portion of prepaid accounts are treated as assets.

Which of the following statements are accurate regarding supplies?

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

When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order.

1. List each account title and its amount from the general ledger 2. Compute the total of debit balances and the total of credit balances 3. Verify that total debit balances equal total credit balances

Debit ratio

= Total liabilities / total assets

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.

The correct definition of an "account" includes which of the following?

A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item

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 explains what a trial balance is?

A trial balance confirms that the sum of debit account balances equals the sum of credit account balances.

Which statement is correct regarding entering transactions into the accounting equation?

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.

Which of the following statements is the best definition of an asset?

Assets are resources owned or controlled by a company and that have expected future benefits.

Identify which of the following lists include only examples of assets.

Building, Cash, Accounts receivable

Which of the following items would be considered "cash" and reflected in a company's Cash account?

Checks, Money orders, Coins

Which of the following would be considered a source document in an accounting system?

Checks, purchase order, payroll records, sales receipt

Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash.

Coins, checks, money orders

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 set of accounts below would have a normal debit balance?

Expenses; Dividends; Cash

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

False

A journal

It is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred

General ledger

It is a collection of all accounts with their activity and balances that exist in a business.

A 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

A trial balance

It is a list of each account and its balance at any given time and is used to verify that debits = credits

Given the descriptions below, which is (are) true regarding notes receivable?

Notes receivable is classified as an asset; It is the promise of another entity to pay a specific sum of money on a specified future date; Another name for a note receivable is a promissory note.

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 correct about prepaid accounts

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

Which of the following statements is correct about prepaid expenses?

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

Which of the following financial statements report(s) the financial position of a business over a period of time?

Statement of retained earnings; Statement of cash flows; Income statement

Which of the following accounts would be considered an asset?

Supplies, Building, Cash, Accounts receivable

Which of the following describes a general ledger?

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

Choose the account(s) below, that would have a normal credit balance.

Unearned Revenues; Revenues; Accounts Payable; Common Stock

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

Supplies are (assets/expenses/liabilities) until they are used. When they are used up, their costs are reported (assets/expenses/liabilities).

assets; expenses

Supplies are (assets/expenses/liabilities) until they are used. When they are used up, their costs are reported as (assets/expenses/liabilities).

assets; expenses

DrEAD

debit (Dr) is the normal balance side for (E)xpense, (A)sset, and (D)ividend accounts; credit the others

L. Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be (debited/credited) on the (left/right) side of the T-account and the Common stock 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.

deccreases

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

increase

The general ledger can be used to determine which of the following

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

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

Transferring entries from the journal to the ledger is called (posting/preparing/journalizing)

posting