Chapters 1-3

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

t-account

Which of the following accounts are stockholders' equity accounts?

1. Retained earnings 2. common stock

Which of the following line items appear on an income statement/

1. Revenues 2. Salaries expenses

Which of the following items are found on a balance sheet?

1. Stockholders' equity 2. Assets 3. Liabilities

Partnership

A business in which two or more persons combine their assets and skills

A journal entry should contain which of the following information?

Accounts and amounts debited Accounts and amounts credited The date Description of the transaction

The body of rules and procedures that guide the measurement and communication of financial accounting information is known as ?

Generally Accepted Accounting Principles (GAAP)

What financial statement conveys a company's ability to generate profits in a current period?

Income Statement

what is found on a balance sheet?

Liabilities Assets Stockholders' equity

The accounting equation is: Assets = ______ + Stockholders' Equity.

Liabilties

Dividends paid to shareholders is on which financial statement?

Statement of Shareholders' Equity

Ming Corporation pays its employees $4,000 in salaries for the current period. Recording the payment of salaries would include a

debit to salary expense.

Yeung Corp. purchases supplies on account. Recording this transaction will include a

debit to supplies.

Because dividends reduce retained earnings, a ______ to dividends is essentially a ______ to retained earnings.

debit;debit

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

debits; credits

Dividends paid to stockholders will cause retained earnings to

decrease

Revenues ______ retained earnings; therefore, to increase any revenue, one would ______ the revenue account.

increase,credit

A chronological record of all economic events affecting a firm are recorded in a(n)

journal

The commonly used format for recording a transaction is referred to as a(n)

journal entry.

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

ledger

Where is the Deferred Revenue account reported in the financial statements?

liability

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.

Assets

resources of a company

When supplies are purchased on account, which of the following occurs?

A liability increases.

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as

accounting

Ending retained earnings is calculated as

beginning retained earnings + net income - dividends

Net Income

the difference between total revenue and total expenses when total revenue is greater

In accounting, the term net is used to describe

the difference between two amounts

The two sources of stockholders' equity are amounts ______.

1. earned by the corporation 2. paid in from shareholders

What are four primary financial statements?

1. Income Statement 2. Statement of Stockholders' Equity 3. Balance Sheet 4. Statement of Cash Flows

What are the two functions of financial accounting?

1. measure business activities of a company 2. communicate those measurement to external parties for decision making purposes

On January 1, Linden has total assets of $100,000, total liabilities of $30,000, and total stockholders' equity of $70,000. Linden purchases $20,000 of supplies on account, and $2,000 of prepaid rent for cash. After these transactions, total assets equal

4$120,000 $100,000 + $20,000 supplies + $2,000 prepaid rent - $2,000 cash = $120,000 total assets.

Farmer, Inc. purchases a tractor for $80,000 cash. Recording this transaction will require which of the following?

Credit cash Debit equipment

Geo Corporation issues stock to investors for $100,000. Recording this transaction will include which of the following?

Credit common stock Debit to cash

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.

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.

Inwood Corporation receives $36,000 in advance from customers for services to be performed over the next three years. Which of the following is used to record this transaction?

Debit cash; credit deferred revenue.

Oasis Company provides services to customers for $10,000 cash. Which of the following is used to record this transaction?

Debit cash; credit revenue.

uller Company provides services to customers for $25,000 cash. Which of the following is used to record this transaction?

Debit cash; credit revenue.

Perkins Company pays employees $5,000 for work performed in the current period. Which of the following is used to record this transaction?

Debit salary expense; credit cash.

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

Debit supplies; credit cash.

Accounting

a system of maintaining records of a company's operations and communicating that information to decision makers

Recording the repayment of a promissory note will include a credit to

cash

Slim purchases equipment with cash. The accounts affected are

cash and equipment.

Roland Corporation borrows $10,000 from the bank by signing a promissory note. Recording this transaction will include:

credit to notes payable debit to cash

Roslin Corp. provides services to customers on account for $5,000. Recording this transaction will include a

credit to revenues. debit to accounts receivable.

A proper journal entry includes the ______, the account and amount debited, the account and amount credited, and a brief explanation of the transaction.

date

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.

Dividends ______ retained earnings; therefore, to increase dividends, one would ______ the dividends account.

decrease;debit

Cray purchases equipment for cash. Total assets will

remain the same

ray purchases equipment for cash. Total assets will

remain the same

Accounting is known as

the language of business

Retained earnings represents

the total net income earned over the life of the company that has not been distributed as dividends.

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

A transaction will always affect at least ______ accounts. Multiple choice question. four

two

The accounting equation is:

Assets = Liabilities + Stockholders' Equity

The last step for analyzing the effect of transactions is:

Confirm that assets are equal to liabilities plus stockholders' equity

Which of these appears on both the income statement and the statement of stockholders' equity?

NET INCOME

True or false: The statement of stockholders' equity indicates the changes in the various equity accounts.

TRUE Reason: A column for each stockholders' equity account is shown with the increases and decreases for the period.

Stockholders' Equity

The owners' claim to assets.

dividend

a distribution of earnings to the stockholders of a corporation

statement of stockholders' equity

a financial statement that summarizes the changes in stockholders' equity over an interval of time

When supplies are purchased on account, which of the following occurs?

a liability increases

The resources of a company are referred to as:

assets

The two components of stockholders' equity are

common stock and retained earnings

The types of accounts which affect retained earnings are

dividends. expenses. revenues.

Stockholders' equity arises primarily from amounts invested by shareholders and amounts ______.

earned by the corporation

Crane purchases equipment by signing a note payable with the equipment dealer for $10,000. The accounts affected for Crane are

equipment and notes payable.

A(n) _____________ transaction involves an exchange between the company and a separate economic entity.

external

True or false: Dividends paid to shareholders are recorded on the income statement as an expense.

false Reason: Dividends to shareholders are a distribution to shareholders and are found on the statement of stockholders' equity.

What are external users referred to as?

financial accounting

Zelda purchases $10,000 of supplies on account. The effects of this transaction are to

increase liabilities. increase assets.

what does debt mean?

left

Accounts that include the term "payable" typically are classified as

liabilties

What are internal users (managers) referred as?

managerial accounting

Stockholders' Equity

owners' claims to resources

For a corporation, the owners' claims to the resources of a company are called

stockholders equity

What is a way financial accounting can also be described as a way to?

tell the financial story of a company

True or false: An external transaction is a transaction the firm conducts with a separate economic entity.

true

rue or false: The accounting equation is: Assets = Liabilities + Stockholders' equity.

true

Jackson Corp. has beginning retained earnings of $400. During the year Jackson had $800 of revenues and $200 in expenses. Jackson paid a dividend of $100. What is retained earnings at year-end?

$900 Reason: Beginning balance $400 + $800 revenues - $200 expenses - $100 dividend = $900 retained earnings at year-end.

Rahls issues stock to investors for $20,000, and has $5,000 of net income in its first year of operations. During Year 2, Rahls earns $10,000 in net income and pays a dividend to stockholders of $4,000. What is the balance in stockholders' equity at the end of year 2?

31,000 Reason: $11,000 is the ending balance in retained earnings. For total stockholders' equity, you must add the amount in the common stock account. $20,000 + $5,000 + $10,000 - $4,000 = $31,000.

Sole Proprietorship

A business owned by one person

Income Statement

A financial statement that reports a company's revenues and expenses and resulting net income or net loss for a specific period of time.

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

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

The heading on the Statement of Stockholders' Equity includes which one of the following? A. The period of time covered B. The beginning retained earnings balance C. Dividends D. The date the statement is prepared E. Net income

A. The period of time covered

Accounts receivable are assets which represent

Amounts owed by customers

Liabilities

Amounts owed to creditors

Which of the following accounts is on the statement of stockholders' equity? A. Accounts payable B. Common stock C. Equipment D. Cash

B. Common stock

Which course is most likely financial accounting? A. College Algebra B. Foreign language C. Molecular Biology D. Physically Education

B. Foreign language

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?

Cash increases Notes payable increases

Financial accounting and reporting standards in the United States are established by

Financial Accounting Standards Board (FASB)

On February 1, Domino Corporation ordered inventory. The inventory was received on February 15. Domino paid for the inventory on February 27. On which of the following dates will Domino record a transaction? (

Reason: No entry is recorded at the time the inventory is ordered because no value has been exchanged, and a transaction has not occurred.

What are the three components of retained earnings?

Revenues, expenses, and dividends

Rory purchases supplies for cash. Which of the following occurs?

Total assets remain the same

A company records the effects of transactions for a particular item in a(n)

account

Liabilities

amounts owed

The financial statement that displays a firm's financial position on a particular date is the?

balance sheet

Revenues ______ retained earnings; therefore, to increase any revenue, one would ______ the revenue account.

increase;credit

What effect does revenue have on retained earnings?

increases

Revenues will ______ retained earnings, and expenses will ______ retained earnings.

increases;decreases

A distribution of net income to owners is called a(n)

dividend

Accounts that include the term "payable" typically are classified as

liabilities

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as?

retained earnings

Which of these appears on both the statement of stockholders' equity and the balance sheet?

retained earnings

What does credit mean?

right

Ending retained earnings appears on the:

statement of stockholders' equity balance sheet

Rahls issues stock to investors for $20,000, and has $5,000 of net income in its first year of operations. During Year 2, Rahls earns $10,000 in net income and pays a dividend to stockholders of $4,000. What is the balance in stockholders' equity at the end of year 2?

$31,000 Reason: $11,000 is the ending balance in retained earnings. For total stockholders' equity, you must add the amount in the common stock account. $20,000 + $5,000 + $10,000 - $4,000 = $31,000.

Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total stockholders' equity at the end of the year?

$33,000 Reason: Beginning retained earnings + Common stock + Net income - Dividends = Ending retained earnings. 0 + $30,000 + $8,000 - $5,000 = $33,000.

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

Cash is increased. Common stock is increased.

Wolfgang Company's assets and stockholders' equity both increased by $50,000 as a result of a single transaction. Which of the following transactions would explain this increase?

Common stock was sold for cash

Which of the following is used to record the summary of effects on one particular item?

account

The basic is referred to as the fundamental model of business valuation.

accounting equation

The fundamental model of business valuation is commonly referred to as the:

accounting equation

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 recieveable

Revenues

amounts recognized when the company sells products or provides service to customers

Using the accounting equation, stockholders' claims on the resources of the corporation can be expressed as

assets- libilities

What financial stament shows that company's resources equal claims to those resources?

balance sheet

Ending retained earnings appears on the:

balance sheet statement of stockholders' equity

The accounting equation is Assets = Liabilities + Stockholders' Equity. Accounts on the right side of the equal sign in this equation are increased with

credits

Many liabilities are referred to as____________ to indicate that amounts must be paid.

payables

Rent paid in advance and classified as an asset is referred to as

prepaid rent

limited libility

prevents stockholders from being held personally responsible for the financial obligations of the corportation