Ch.2 accounting learn smart

The accounting equation is:

Assets = Liabilities + Stockholders' Equity

Analysis of Mueller Company's accounts show that as a result of a single transaction, both cash and notes payable increased by $10,000. Which of the following transactions would have caused this increase?

Borrowing cash and signing a promissory note

Rawlings Corp. borrows $3,000 on a note payable from Third National Bank. Which of the following is used to record this transaction?

Debit cash $3,000; credit note payable $3,000.

The first step for analyzing the effect of transactions is:

Determine one account in the accounting equation that will increase or decrease

True or false: A balance sheet is a list of all accounts and their balances showing that debits equals credits.

False

Which of the following contains a list of transactions affecting each account and the account's balance?

General ledger

LMN Enterprises performs accounting services for a client for $3,000 cash. What is the effect on the accounting equation?

Increase assets and increase retained earnings

What effect does revenue have on retained earnings?

Increases

manual system

Journal entries are posted periodically to the general ledger

Shriver Corp. borrows $25,000 from a bank and signs a two-year promissory note. What accounts will be affected by this transaction and what is the effect?

Notes payable increases; Cash increases

Which of the following is an external transaction?

Purchasing supplies from a vendor

The accounting equation is: Assets = Liabilities +

Stockholders' Equity

true or false: the accounting equation must always remain in balance:

TRUE

When should revenue be recorded?

When the services are performed

True or false: A ledger provides a chronological record of all transactions affecting the firm.

false

Smith Company's journal shows a debit to cash and a credit to notes payable, both for $15,000. This indicates that Smith Company:

borrowed $15,000 cash and signed a note

The type of information included in an account includes

columns for debits and credits.; the account title.

The last step for analyzing the effect of transactions is:

confirm that assets are equal to liabilities plus SHE

Shannon Corporation issues common stock for $25,000. Recording this transaction will include a

credit to common stock

what is the effect of dividends on retained earnings?

decrease

True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.

false

true or false: a ledger provides a chronological record of the transactions affecting the firm.

false

true or false: the term debit mean increase, and the term credit means decrease:

false

A transaction is initially recorded in the general __________, and then subsequently posted to the general ___________.

journal; ledger

Which of the following includes the list of transactions affecting each individual account and the account's balance?

ledger

the purpose of a general ledger is to:

provide in a single location the list of transactions affecting each account and the account's balance.

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer.

An account that is used informally for analysis instead of drawing a formal general ledger account is referred to as a:

t-account

A list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a(n):

trial balance

Price Company provides cleaning services to customers for $10,000 cash. What are the effects of this transaction on the accounting equation?

-increase retained earnings -increase assets

Indicate which situations would require Zenda Company to record revenue in the current period. (Select all that apply.)

1) Zenda performs services on account. 2) Zenda performs services for cash.

The two roles of financial accounting are to:

1) communicate information to external parties for decision making purposes. 2) measure business activities of the company.

If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs? (Select all that apply)

A liability is decreased; Another asset is increased

Which of the following represents a common advantage of a computerized accounting system?

Journal entries are instantly posted to the ledger

which of the following are external transactions? a) using supplies purchased last month b) paying salaries to employees c) purchasing inventory from supplies d) borrowing money from the bank

b,c,d

The two components of stockholders' equity are

common stock and retained earnings.

Tabor Company issues $20,000 of common stock to investors. Recording this transaction will include a credit to

common stock.

which of the following are SHE?

common stock; retained earnings

A t-account has space at the top for the account title and two sides for recording ______ and ______ to the account.

debits; credits

Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicates that Klick:

issued shares to stockholders

computerized system

journal entries are instantly posed to the general ledger

The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as ____________.

posting

The process of transferring information from the journal to the ledger is referred to as:

posting

Consistent with the ______________ recognition principle, companies record revenue at the time goods are provided to customers.

revenue

London Corp. issues 1,000 shares of stock for $20 per share. What are the effects of this transaction?

Common stock is increased. ; Cash is increased.

Resnick purchases supplies on account. Which of the following is used to record this transaction?

Debit supplies; credit accounts payable.

Torrence purchases supplies for cash. Which of the following is used to record this transaction?

Debit supplies; credit cash.

A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.

account; general ledger

When a company performs services for a customer, and the customer agrees to pay for the services at a later date, the transaction is recorded in which account?

accounts receivable

Pluto Inc. borrows $3,000 from Second National Bank by signing a promissory note. Recording this transaction will include which of the following?

debit cash; credit note payable

Lassiter Industries purchased equipment for $140,000. Lassiter expects to use the equipment over the next 10 years. Recording this transaction would include a:

debit to equipment $140,000.

An account should have an account title, account number, a place for the date of the transaction, and two columns for:

debits and credits.

what is the effect of expense on retained earnings?

decrease

Dividends paid to stockholders will cause retained earnings to:

decrease.

Expenses will cause retained earnings to

decrease.

Which type of account is increased with a debit? Revenue Expense Stockholders' Equity Liability

expense

Credits increase revenues, whereas debits increase

expenses and dividends.

revenues cause retained earnings to:

increase

what effect does revenue have on retained earnings?

increases

The term debit means to place the entry on _______________ the hand side of the account, and the term credit means to place the entry on the ______________ hand side of the account.

left;right

An increase in revenues increases _____ _____ , which increases retained earnings, which increases stockholders' equity

net income

Gondel Company's journal shows a debit to prepaid rent and a credit to cash. This means that Gondel Company:

paid rent in advance

Gondel Company's journal shows a debit to prepaid rent and a credit to cash. This means that Gondel Company

paid rent in advance.

Indigo Company's journal reveals that equipment was debited and notes payable was credited, both for $10,000. Indigo Company must have

purchased equipment and signed a note for the purchase price

Jonathan Company's journal shows a debit to supplies and a credit to accounts payable. This means that Jonathan:

purchased supplies on account

The purpose of a journal is to

record a chronological listing of every transaction for a company.

An increase in revenues increases net income, which results in an increase to:

retained earnings

Which of the following types of account is increased with a credit? Revenue Dividend Expense Asset

revenue

the two basic components for calculating net income are: _________ and_________

revenues & expenses

Which of the following are components of calculating net income?

revenues and expenses

identify the three components of retained earnings.

revenues, dividends, expenses

what are the three components of retained earnings?

revenues, expenses and dividends

Accounts receivable are assets which represent

the amounts owed by customers.