Accounting chapter 2

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

date

The accounts on the left side of the accounting equation are increased with a(n) __________ to the account, whereas accounts on the right side of the accounting equation are increased with a(n) ____________

debit and credit

The sum of accounts with ___ balances must equal the sum of the accounts with ___ balances.

debit, credit

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

debits and credits

For every journal entry, total ____ must be equal to total ____.

debits and credits

___________ transactions typically are recognized at the end of the period

internal

an event that affects the financial position of a company but does not include an exchange with a separate economic entity is a(n)

internal transaction

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

journal

The accounting equation is: Assets = ___________ + stockholders' equity

liabilities

A credit increases which of the following types of accounts

liabilities and stockholder equity

A chart of accounts is a

list of all account names and numbers used by a company

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

- another asset is increased - a liability is decreased

The two roles of financial accounting are to:

-communicate information to external parties for decision making purposes -measure business activities of the company

Which of the following are internal transactions

-earning revenues after cash is received in advance from customers -using supplies purchased and paid for last month

Whatr'e the steps for measuring transactions in the correct order

1. Use a source document to identify accounts affected 2. Analyze the impact of the transaction on the accounting equation 3. Assess whether the transaction results in a debit or credit to account balances 4. Record the transaction in a journal 5. Post the transaction to the general ledger

What are the three steps for analyzing the effect of transactions?

1. determine one account in the accounting equation that will increase or decrease 2. determine a second account in the accounting equation that will increase or decrease. 3. Confirm that assets are equal to liabilities plus stockholders' equity

Accounts receivable are assets which represent

Amounts owed by customers

Jeremy issues 5,000 shares of common stock for $10 per share. Which of the following accounts are affected?

Cash and common stock

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 increase and notes payable increase

In a double-entry accounting system, a(n) ______ represents the left side of the account

Debit

Accounting transactions are classified as which of the following?

External transactions and internal transactions

Lexington Company borrows $10,000 from a bank by signing a promissory note. What are the effects of this transaction on the accounting equation?

Increase assets and increase liabilities

What effect does revenue have on retained earnings?

Increases

Price Company provides cleaning services to customers for $10,000 cash. What are the effects of this transaction on the accounting equation?

Increases assets and increases retained earnings

When cash is received in advance for services to be performed at a later date, an asset is increased and

a liability is increased

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

account

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

account; general ledger

The full set of accounting procedures used to measure and communicate business transactions is referred to as the

accounting cycle

Elements of the accounting equation are represented by _____________, which are contained in the general ledger.

accounts

The cost of equipment is typically recorded as a(n) ____________, while the cost of repairs is typically recorded as a(n) ____________.

asset & expense

The purpose of a trial balance is to

assist in preparing financial statements, assist in preparing adjusting entries, ensure debits equal credits

Analysis of Mueller company's accounts show that as a result of a single transaction, both cash and notes payable increased by $10,000. What would have caused the increase?

borrowing cash and signing a promissory note.

The two components of stockholders' equity are

common stock and retained earnings

A revenue account is increased with a

credit

In a double entry accounting system, the right side of the account is referred to as a

credit

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

credit common stock and debit to cash

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

debits; credits

What effect will the payment of salary expense have on stockholders' equity?

decrease

What is the effect of dividends on retained earnings?

decrease

What is the effect of expenses on retained earnings?

decrease

What is the effect of expenses on stockholders' equity?

decrease

When a company pays salary expense, the balance sheet effects are to

decrease assets and decrease stockholders' equity

After the accountant analyzes the impact of a transaction on the accounting equation, the next step in the measurement process is to

determine the accounts to debit and credit

A(n) __________ represents a payment of cash to the stockholders of a company

dividend

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 between the company and a separate economic entity.

external

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

increase liabilities, increase assets

Where is the deferred revenue account reported in the financial statements

on the balance sheet as a liability

The process of transferring information from a journal entery to the specific accounts affected in the general ledger is referred to as _________.

posting

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

what is an example of an external transaction

purchasing supplies from a vendor

Prepaid rent is

rent paid in advance

An increase in revenues increases net income, which results in an increase to

retained earnings

The two basic components for calculating net income are ___________ and ___________.

revenues and expenses

The account differed revenue is used to record

revenues received in advance from customers

What are the three components of retained earnings

revenues, expenses, dividends

A payment of cash dividends will decrease which of the following?

stockholders' equity, retained earnings and assets

The type of information included in an account includes

the account title and columns for increases and decreases

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

trial balance

True or False: an external transaction is a transaction the firm conducts with separate economic entity

true

What is an internal transaction?

using supplies on hand