ACC 210 Chapter 2

False

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

True

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

True

True or false: The accounting equation must always remain in balance.

False

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

debits and credits

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

Ledger

A transaction is initially recorded in the journal, and then subsequently posted to the general:

account; general ledger

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

Debits and Credits

Accounts on the left side of the accounting equation (assets) are increased with a(n) _____________ to the account, whereas accounts on the right side of the accounting equation are increased with a(n) _______________

The amounts owed by customers

Accounts receivable are assets which represent:

Assets

Accounts receivable are:

External

An _________________ transaction involves an exchange between the company and a separate economic entity

debits and credits

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

A t-account

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

Debit cash; credit common stock.

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

revenue

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

Decrease

Dividends paid to stockholders will cause retained earnings to:

Decrease

Expenses will cause retained earnings to:

Debit equipment Credit cash

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

Debit to cash Credit common stock

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

Another asset is increased A liability is decreased

If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?

purchased equipment and signed a note for the purchase price

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

issued shares to stockholders

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

issued shares to stockholders

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

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

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

Debit supplies; credit accounts payable.

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

Increase

Revenues cause retained earnings to:

credit to notes payable debit to cash

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

credit to common stock.

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

borrowed $15,000 cash and signed a note

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

Assets=Liabilities+Stockholders' Equity

The accounting equation is:

posting

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:

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

The purpose of a general ledger is to:

Record a chronological listing of every transaction for a company.

The purpose of the journal is to:

Revenue and Expense

The two basic components for calculating net income are:

Common stock and retained earnings

The two components of stockholders' equity are:

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

The two roles of financial accounting are to:

the account title. columns for debits and credits.

The type of information included in an account includes:

Debit supplies; credit cash.

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

provided goods or services to a customer.

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

Revenues, expenses, and dividends

What are the three components of retained earnings?

Decrease

What is the effect of dividends on retained earnings?

Increases retained earnings

What is the effect of net income on retained earnings?

Accounts Receivable

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?

General Ledger

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

Journal entries are instantly posted to the ledger

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

Revenue

Which type of account is increased with a credit?

Expense

Which type of account is increased with a debit?