Ch 2 Accounting

Determine which accounts are affected: billed customers for delivery services on account (rendered)

Dr. accounts receivable Cr. revenue

Determine which accounts are affected: received cash from customers on account

Dr. cash Cr. account receivable

Determine which accounts are affected: In October, Pioneer receives a 1200 cash advance from a client for advertising services that are expected to be completed by December 31

Dr. Cash Cr. Unearned Service Revenue (liability)

Which of the following is not true of the terms debit and credit? a. They can be abbreviated as Dr. and Cr. b. They can be interpreted to mean increase and decrease. c. They can be used to describe the balance of an account. d. They can be interpreted to mean left and right.

b

Which one of the following represents the expanded basic accounting equation? a. Assets = Liabilities + Common stock + Retained Earnings + Dividends - Revenues - Expenses. b. Assets + Dividends + Expenses = Liabilities + Common stock + Retained Earnings + Revenues. c. Assets - Liabilities - Dividends = Common stock + Retained Earnings + Revenues - Expenses. d. Assets = Revenues + Expenses - Liabilities.

b

On October 3, Karl Schickele, a carpenter, received a cash payment for services previously billed to a client. Karl paid his telephone bill, and he also bought equipment on credit. For the three transactions, at least one of the entries will include a a. credit to Retained Earnings. b. credit to Notes Payable. c. debit to Accounts Receivable. d. credit to Accounts Payable.

d

Limitations of a Trial Balance:

- a transaction is not journalized - a correct journal entry is not posted - a journal entry is posted twice - incorrect accounts are used in journalizing or posting - offsetting errors are made in recording the amount of a transaction

Why should you journalize?

- discloses the complete effects of a transaction - provides a chronological record of transactions - helps to prevent or locate errors because the debit and credit amounts can be easily compared

On October 4, Pioneer pays 600 for a 1-year insurance policy that will expire next year on September 30.

Cr. Cash Dr. Prepaid Insurance (asset)

Determine which accounts are affected: paid creditors on account

Cr. cash Dr. accounts payable

The General ledger contains the the entire group of accounts maintained by a company. T or F?

T

The ledger provides the balance in each of the accounts. T or F?

T

Trial balance is the last step in the recording process. The trial balance proves the mathematical equality of debits and credits. It is useful in uncovering errors in journalizing and posting. It is useful in preparing financial statements. T or F?

T

The double-entry system requires that each transaction must be recorded a. in at least two different accounts. b. in two sets of books. c. in a journal and in a ledger. d. first as a revenue and then as an expense.

a

Which of the following statements is incorrect? a. Expenses increase stockholders' equity. b. Expenses have normal debit balances. c. Expenses decrease stockholders' equity. d. Expenses are a negative factor in the computation of net income.

a

An account consists of a. a title, a debit balance, and a credit balance. b. a title, a left side, and a debit balance. c. a title, a debit side, and a credit side. d. a title, a right side, and a debit balance.

c

In recording an accounting transaction in a double-entry system a. the number of debit accounts must equal the number of credit accounts. b. there must always be entries made on both sides of the accounting equation. c. the amount of the debits must equal the amount of the credits. d. there must only be two accounts affected by any transaction.

c

In the first month of operations, the total of the debit entries to the cash account amounted to $1,200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n) a. $800 credit balance. b. $1,200 debit balance. c. $400 debit balance. d. $400 credit balance.

c

A trial balance would only help in detecting which one of the following errors? a. A transaction that is not journalized b. A journal entry that is posted twice c. Offsetting errors are made in recording the transaction d. A transposition error when transferring the debit side of journal entry to the ledger

d

An accountant has debited an asset account for $1,200 and credited a liability account for $500. What can be done to complete the recording of the transaction? a. Nothing further must be done. b. Debit a Stockholders' equity account for $700. c. Debit another asset account for $700. d. Credit a different asset account for $700.

d

Posting is the process of transferring amounts from ____ to the _____ accounts.

the journal to the ledger accounts