financial accounting ch 2

Given the descriptions below, which are true regarding notes receivable?

-Notes receivable is classified as an asset. -Another name for a note receivable is a promissory note. -It is the promise of another entity to pay a specific sum of money on a specified future date.

An annual insurance policy is paid in advance by a company. How will the company treat this initial payment and the subsequent expiration of a portion of the policy over time?

-Over time, the expired portion of the policy must be removed from the asset account as it has been used up and is no longer considered an asset. -As a portion of the policy expires, the expired portion will be removed and transferred to an expense account. -The initial payment will be recorded as an increase to a Prepaid Insurance account.

The general ledger can be used to determine which of the following

-increases and decreases in all accounts in a business -which accounts are being used by a company and their balances at any given time -common and unique accounts used by a business.

When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order.

1. List each account title and its amount from the general ledger 2. compute the total of debit balances and the total of credit balances 3, verify that total debit balances equal total credit balances

Which statement best describes a T-account?

A T-account represents a ledger account and is a tool used to understand the effects of transactions.

Which of the following statements is (are) correct regarding a T-account?

A T-account represents a ledger account. A T-account will show the debit and credit effects of transactions. A T-account may be used as a tool to visualize the effects of a transaction.

The correct definition of an "account" includes which of the following?

A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item

In defining a reporting period, which of the following statements is (are) correct?

A reporting period is determined by the business. A reporting period can be one month, one quarter or one year. A one-year reporting period is known as the fiscal year.

Which of the following is the best definition of a source document in the accounting process?

A source document identifies and describes transactions and is the basis for entering an event into the accounting system.

Which of the following statements explains what a trial balance is?

A trial balance confirms that the sum of debit account balances equals the sum of credit account balances.

Choose the accounts below, that would have a normal credit balance.

Accounts Payable Revenues Unearned Revenues Common Stock

Which statement is correct regarding entering transactions into the accounting equation?

After recording a transaction, the total of the right side of the accounting equation must equal the total of the left side of the accounting equation.

Which of the following statements is the best definition of an asset?

Assets are resources owned or controlled by a company and that have expected future benefits.

Which of the following accounts is an asset?

Building Supplies Accounts receivable Cash

Identify which of the following lists include only examples of assets.

Building, Cash, Accounts receivable

Which of the following items would be considered "cash" and reflected in a company's Cash account?

Coins Money orders Checks

Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash.

Coins, checks, money orders

J. Jackson invested $1,000 in his business in exchange for common stock. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit Cash; credit Common stock

Which set of accounts below would have a normal debit balance?

Expenses; Dividends; Cash

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt.

If a company has a lot of debt, they may not be able to afford to take on new debt. A company that finances their assets by borrowing will need to make enough money to pay off the debt. A company's required debt payments may be greater than its ability to generate money to make those payments.

journal

It is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred

general ladder

It is a collection of all accounts with their activity and balances that exist in a business.

Which of the following statements is the best definition of the Chart of Accounts?

It is a list of all ledger accounts in a business and includes an identification number assigned to each account.

chart of accounts

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account

trial balance

It is a list of each account and its balance at any given time and is used to verify that debits = credits

Which of the following is correct regarding posting a transaction?

Posting means to transfer journal information to a ledger.

Select the statement below that best defines prepaid accounts.

Prepaid accounts are assets that represent prepayments of future expenses.

Which of the following statements is correct about prepaid expenses?

Prepaid expenses are also called prepaid accounts and are considered assets.

Which of the following would be considered a source document in an accounting system?

Sales receipt Checks Payroll records Purchase order

Which of the following financial statements report(s) the financial position of a business over a period of time?

Statement of retained earnings Income statement Statement of cash flows

Which of the following describes a general ledger?

The general ledger is a record containing all accounts used by a company.

Which of the following are accurate statements regarding how to report or treat prepaid accounts?

The unexpired portion of prepaid accounts are treated as assets. The expired portion of prepaid accounts is reported on the income statement as an expense. Over time, the expired portion of prepaid accounts is removed from the account and reported as an expense.

Identify which of the following formulas correctly defines how to calculate the debt ratio.

Total liabilities/Total assets

Which of the following statements correctly explains how to prepare a trial balance?

Verify that the total debit balances equals the total credit balances. List each account title and its amount from the ledger. Compute the total of debit balances and the total of credit balances.

Notes receivable are an

asset

Prepaid accounts are _______ that represent prepayments of future expenses and are increased on the ________ side of the accounting equation.

assets, left

L. Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be ___________ (debited/credited) on the __________ (left/right) side of the T-account and the Common stock account would be __________ (debited/credited) on the _________ (left/right) side of the T-account.

debited, left, credited, right

An account is a record of increases and ________ in a specific asset, liability, equity, revenue or expense.

decreases

Assets are claims (by creditors) against the company.

false

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) _________ (increase/decrease) in total liabilities or equity.

increase

A trial balance is a(n) (list/balance/chart) _________ of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of __________ account balances.

list, credit

Transferring entries from the general journal to the general ledger is called _______

posting