Accounting 2

Accounts payable refer to obligations owed __________ the business and are classified as a(n) ___________

by liability

Which of the following statements is correct regarding expenses.

Expenses are increased on the left side of their T-account because they decrease equity.

Recall that the Balance Sheet reports the equality of the accounting equation and would include which of the following amounts?

Total Liabilities Retained earnings balance at end of period Total Assets

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

Total liabilities/Total assets

Notes receivable is considered a(n)

asset

Accrued liabilities are amounts owed that are not yet

paid

Which of the following statements is (are) correct regarding the effect of debiting or crediting accounts?

To decrease an asset, you would credit it. To increase the Dividends account, you would debit it. To reduce Cash, you would credit it. To reduce Accounts payable, you would debit it To increase an expense account, you would debit it.

From the lists of accounts below, which one contains only revenue accounts?

Interest revenue, Professional fees earned, Sales

The business earns $2,800 cash for services performed. How would this receipt affect the total equity of a business?

Revenues would be increased, so equity is increased.

Liabilities

The obligations owed by the business to creditors

An income statement reports:

the revenues less the expenses incurred by a business

Select the statement below that best defines prepaid accounts.

Prepaid accounts are assets that represent prepayments of future expenses.

Which of the following accounts would be considered an asset?

Supplies Building Cash Accounts receivable

Which of the following statements are accurate regarding supplies?

Unused supplies are treated as assets. Supplies are assets until they are used. Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies. When supplies are purchased, they are added to the Supplies account.

True or false: Assets are claims (by creditors) against the company.

false

The statement of retained earnings reports:

how equity changed over a period of time

Revenues cause equity to ___________ and they are increased on the ___________ side of the T-account.

increase right

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 accounts has a normal debit balance?

Accounts receivable Supplies Cash Buildings

Which of the following formulas is correct in depicting the expanded accounting equation?

Assets = Liabilities + Common stock - Dividends + Revenues - Expenses

Which of the following financial statements reports the financial position of a business at a point in time?

Balance sheet

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

Building, cash, accounts receivable

On Nov. 1, Lyons Company pays $1000 cash for a 12-month insurance policy. Use your knowledge of what a correct journal entry should look like to identify what would be included in the correct journal entry

Cash would be credited and listed second Prepaid Insurance would be debited and listed first

On Mar 3, Lyons Company received $100 cash in advance of providing catering services to a customer. Use your knowledge of what a correct journal entry should look like to identify what would be included in the correct journal entry

Cash would be debited and listed first Unearned Revenue would be credited and listed second

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

Which of the following statements about the Dividends account is (are) correct?

Dividends is used to record distributions of assets to the owners of a business. Dividends are increased on the left side of the T-account. Dividends decrease equity.

Which of the following statements is the correct definition of equity?

Equity is the owner's claim on a company's assets.

A business pays $500 for rent. How would this payment affect the equity of a business?

Expenses are increased, so equity is decreased.

Which of the following statements is correct regarding the effect of debits and credits in accounts?

Expenses reduce equity, so to increase an expense account you would debit it.

The business receives and immediately pays a $300 advertising bill. How would this payment affect the total equity of a business?

Expenses would be increased, so equity is decreased.

A 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

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

Money orders Coin Checks

Which of the following statements is (are) correct regarding the Notes payable account?

Notes payable is a formal promise to pay a certain sum of money on a specified future date. Notes payable is a liability account. Notes payable is reported on the balance sheet.

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

Payroll records Checks Sales receipt Purchase order

Which of the following statements is correct about prepaid accounts

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

Which of the following accounts are examples of expenses?

Rent expense Supplies expense

Which of the following statements about revenues is correct?

Revenues cause equity to increase, and they are increased on the right side of the T-account.

The business earns $700 of consulting revenue. How would these earnings affect the total equity of a business?

Revenues increase, so total equity is increased.

Which of the following statements are correct regarding how the financial statements are linked?

The ending balance in the retained earnings account is carried to the balance sheet. Net Income from the income statement is carried to the statement of retained earnings.

Since expenses are the costs of doing business and cause equity to _______ , expenses are increased on the _________ side of their T-account.

decrease left

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

decreases

True or false: The cost of land owned by a business is recorded in the Land account and this account is classified as an expense.

false

All of the following are examples of accrued liabilities

wages payable interest payable taxes payable

You are entering a transaction in the journal. Place the following steps in the order that they would be entered in the journal.

1. enter date of transaction in date column 2. enter name of account(s) debited and their amounts 3. enter name of account(s) credited and their amounts 4. enter explaination

Which of the following accounts has a normal credit balance?

Common stock Accounts payable Unearned consulting revenue

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. Over time, the expired portion of prepaid accounts is transferred from the asset account and reported as an expense. The expired portion of prepaid accounts is reported on the income statement as an expense.

Which of the following would be included on an income statement?

Total revenues Total expenses Net income

Supplies are ___________ until they are used. When they are used up, their costs are reported as ___________

assets expenses

When financial statements are prepared, unexpired prepaid accounts are recorded as __________ and the expired portion of the prepaid account is reported as a(n) ___________

assets expenses

When the product or service related to an unearned revenue is delivered, the earned portion of the unearned revenue is transferred to a _____ account.

revenue

Revenues cause equity to ____________ and they are increased on the __________ of the T-accout

increase right

Accounts receivable are _________ by credit sales and are __________ by customer payments.

increased decreased

Choose the statement below that correctly explains a general journal..

A journal is a complete record of each transaction in one place and includes the debit and credit of each transaction.

Which of the following statements is the correct definition of a liability?

A liability is a claim by a creditor against the assets of a business.

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

revenues

The dollars earned because of services performed or products sold

Which of the following statements is the correct definition of a creditor?

A creditor is an individual or organization that has a right to receive payments from a business.

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

Expenses; Dividends; Cash

Which of the following accounts are examples of revenues?

Fees earned Service revenue Sales

A general ledger

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

A 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

Which of the following statements is the best definition of the 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.

A trial balance

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

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

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

From the following lists of accounts, choose the list(s) which contains only expense accounts.

Rent expense, wages expense, insurance expense

Assets Equity Revenues Liabilities

Things of value owned by the business The residual interest in the assets of a business after deducting the business's debts The dollars earned because of services performed or products sold The obligations owed by the business to creditors

equity

a condition in which people receive from a relationship in proportion to what they give to it

Choose the account(s) below, that would have a normal credit balance.

accounts payable common stock unearned revenues revenues

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

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

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.

Which of the following statements is (are) true about accounts receivables?

Accounts receivable reflects the amount still owed by customers. Accounts receivable are increased when credit sales are made.

Select the statements below that are correct in regards to entering transactions in a journal.

Total dollar amount of debits must equal the total dollar amount of credits. Credited accounts should be indented. Leave one blank line between each completed journal entry.

Which of the following statements is (are) correct regarding unearned revenues?

Unearned revenues refer to a liability that is settled when a company delivers a product or performs a service. Unearned revenue is a liability account which is set up when a customer pays in advance for a product or service.

Which of the following are examples of prepaid (expense) accounts?

Prepaid rent Prepaid insurance

When entering a transaction into a general journal, the entry would be dated; then the accounts ________ would be listed first; then the accounts ___________ would be listed next; and finally, a(n) ____________ would be included to show the details of the transaction.

debited credited explanation, description, or brief explanation

Which of the following statements is accurate regarding the Building account?

A Building asset account is used to record the costs of purchasing a store, office, warehouse or factory.

Which of the following accounts would be considered an asset?

Accounts receivable Cash Supplies Building

When the stockholders receive a dividend, how would this affect the equity of a business?

Assets are decreased and equity is decreased.

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.

The stockholders of a business received a $1000 dividend. How would this affect the total equity of the business?

Assets would be decreased and total equity would decrease as well.

Which of the following statements is (are) correct regarding a journal?

In a journal, both the debit and credit side of the transaction can be seen. Transactions are generally entered in chronological order. A journal is used to record business transactions.

Which of the following statements is accurate regarding Accounts payable?

accounts payable refer to promises to pay later, which may arise from the purchase of supplies or services.

The Building account is a(n) _______________ account and is reported on the__________________side of the accounting equation.

asset left

On Jan. 2, Callie Company received a $700 payment from a customer previously billed for services performed. The journal entry to record this transaction would include a _______ to the _____________ account and a _________ (debit, credit) to the Accounts Receivable account.

debit cash credit

On Jan. 2, Callie Company received a $700 payment from a customer previously billed for services performed. The journal entry to record this transaction would include a ________ to the ________ account and a ________ (debit, credit) to the Accounts Receivable account.

debit cash credit

A business paid $40 in dividends. Show how to record the transaction to the T-accounts by completing the following sentence. Dividends would be ________________ on the __________ side of the T-account. and Cash would be ______________ on the ___________ side of the T-account.

debited left credited right

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. Use one word for each blank.

list credit

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

assets

money and other valuables belonging to an individual or business

True or false: The revenue recognition principle states that revenue should be recorded in the period in which it is earned which may or may not be the period in which payment was actually received.

true

Which statement best describes a T-account?

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

Equipment is ___________ account. It is reported on the ____________ side of the accounting equation and is _________ when equipment is purchased.

asset left increased

The balance sheet reports:

assets, liabilities and the ending retained earnings balance

On Sept 9, Daniels Corporation earns $2,000 by performing consulting services. Their customer said that she would pay next month. Daniels Corporation journalized the transaction as follows, but something is wrong with the journal entry. Use your knowledge of what a correct journal entry should look like to identify everything that is wrong.

The correct account that should be debited is the Accounts receivable account. Accounts payable is not involved in this transaction. The Consulting revenue account should be indented, as it is credited. Consulting revenue should be listed below the debited account as it is credited.

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?

The initial payment will be recorded as an increase to a Prepaid Insurance account. 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.

Which of the following statements is (are) true regarding the balance sheet? (Check all that apply.)

The report date includes a single calendar day. It reports the financial position at a point in time. It depicts the equality of the accounting equation.

Paul's Programming Services paid $100 dividends.

Debit Dividends; credit Cash.

Which of the following statements is (are) accurate regarding equipment purchased within a business?

Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed. Equipment is an asset. Equipment is reported on the left side of the accounting equation. Equipment purchases are reported on the balance sheet.

Which of the following statements is accurate about the Land account?

The Land account is an asset. The Land account is used to record the costs of land purchased by the business. The Land account is increased on the left side of its T-account.

Illustrate how the financial statements are linked by placing them in the correct order of preparation.

1. income statement 2. statement of retained earnings 3. balance sheet

Which of the following statements is (are) correct regarding the definition of a liability?

A liability is a debt owed by the business. A liability can be settled by transferring assets or providing products or services to others. A liability is a claim by creditors against the assets of a business.

Which of the statements below is true regarding the statement of retained earnings?

Both the beginning and ending retained earnings balances are reported on the statement.

Which of the following would be included on a statement of retained earnings?

Retained earnings at beginning of period Dividends Net income (loss) Retained earnings at end of period

The Dividends account is used to record ________ by the owner and has a __________ impact on equity.

dividends negative

The Notes payable account is a(n) ____________ account and is increased on the ___________ side of the T-account.

liability right

According to the revenue recognition principle, revenue is to be recognized when:

the product or service is provided