Chapter 2 Accounting Study Set

The purpose of a journal is to

Record a chronological listing of every transaction for a company

Which type of account is increased with a debit?

Expense

A 1)__________ is maintained for each financial statement item, whereas a 2)__________ contains all of the accounts of the company.

1. Account 2. General Ledger

A journal provides a

Chronological record of all transactions affecting a firm

Which of the following are stockholder equity accounts?

Common stock Retained earnings

The two components of stockholders' equity are

Common stock and retained earnings.

Which of the following is an external transaction?

Purchasing supplies from a vendor

Accounting systems: 1)___________ = journal entries are instantly posted to the general ledger 2)___________ = journal entries are posted periodically to the general ledger

1. computerized system 2. manual system

A transaction is initially recorded in the 1)_________, and then subsequently posted to the 2)____________

1. journal 2. general ledger

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

Debits and credits.

Identify the three components of retained earnings.

Expenses Revenues dividends

Credits increase revenues, whereas debits increase

Expenses and dividends

True or false: The term debit means increase, and the term credit means decrease.

False, debit means left; credit means right. Some accounts you debit to increase; other accounts you credit to increase.

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

False; a trial balance is a list of all accounts and their balances showing debits equal credits. A balance sheet presents assets, liabilities, and stockholders' equity

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

Ledger

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

posting

The term 1)________ means to place the entry on the left hand side of the account, and the term 2)_________ means to place the entry on the right hand side of the account

1. debit 2. credit

A list of all accounts and their balances at a particular date showing that debit equals credit is referred to as a

trial balance

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

General ledger

The accounting equation is:

assets = liabilities + stockholders' equity

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

posting

The accounting equation is:

Assets = Liabilities + Stockholders' Equity

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

Credit to common stock.

Carnival Company issues common stock to investors for $50,000. Which of the following is used to record this transaction?

Debit cash; credit common stock

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

Which of the following are external transactions?

Purchasing inventory from suppliers Paying salaries to employees Borrowing money from the bank

What are the three components of retained earnings?

Revenues, expenses, and dividends

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

at the time

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

false

True or false: The term debit means increase, and the term credit means decrease

false

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

false

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

trial balance

The two roles of financial accounting are to:

Communicate information to external parties for decision making purposes Measure business activities of the company

The type of information included in an account includes

The account title Columns for debits and credits