Chapter 2 Accounting
What are the three steps for analyzing the effect of transactions in the correct order?
1. Determine one account in the accounting equation that will increase or decrease 2. Determine a second account in the accounting equation that will increase or decrease 3. Confirm that assets are equal to liabilities plus stockholders' equity
The steps for measuring transactions
1. Use a source document to identify accounts affected 2. Analyze the impact of the transaction on the accounting equation 3. Assess whether the transaction results in a debit or credit to account balances 4. Record the transaction in a journal 5. Post the transaction to the general ledger
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
The full set of accounting procedures used to measure and communicate business transactions is referred to as the
Accounting cycle
The primary purpose of a source document is to assist in:
Analyzing a transaction
Expense
Cost of conducting business during the period
Larkin Company pays $300 for utilities for the month. Which of the following is used to record this transaction?
Debit utilities expense; credit cash.
What effect will the payment of salary expense have on stockholders' equity?
Decrease
Dividend
Distribution of cash to stockholders
Which of the following are internal transactions? Paying salaries to an employee Borrowing cash that will be repaid in five years to the bank Earning revenues after cash is received in advance from customers Using supplies purchased and paid for last month
Earning revenues after cash is received in advance from customers & Using supplies purchased and paid for last month.
A () () is a collection of accounts used to keep track of increases and decreases in financial position elements.
General ledger
An event that affects the financial position of a company but does not include an exchange with a separate economic entity is an
Internal transaction
The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as
Posting
External transaction
Purchasing supplies from a vendor
Which of the following is an external transaction?
Purchasing supplies from a vendor
What are the stockholder equity accounts?
Retained earnings & Common Stock
Match the effect of dividends with the correct terms: Stockholders & Company
Stockholders- Increase in resources Company- Decrees in resources
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() ().
Trial balance
Internal transaction
Using supplies on hand
A separate () is used to post transactions and provides a summary of the effects of all transactions for a particular item.
account
A proper journal entry includes the (), the account and amount debited, the account and amount credited, and a brief explanation of the transaction.
date
In a double-entry accounting system, a () represents the left side of the account.
debit
For every journal entry, () must be equal to credits
debits
A t-account has space at the top for the account title and two sides for recording () and () to the account.
debits; credits
An () transaction involves an exchange between the company and a separate economic entity.
external
The term "accounting cycle" refers to the full set of () utilized to measure and communicate business transactions to external decision makes.
procedures
Prepaid rent is
rent paid in advance
Accounting transactions are classified as which of the following?
External transactions & Internal transactions
A chronological record of all economic events affecting a firm is a ().
journal
If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?
A liability is decreased & Another asset is increased
Which of the following are internal transactions?
Using supplies purchased and paid for last month. & Earning revenues after cash is received in advance from customers.