Accounting SB2

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

retained earnings

The purpose of a journal is to

record a chronological listing of every transaction for a company.

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

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

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.

Pluto Inc. borrows $3,000 from Second National Bank by signing a promissory note. Recording this transaction will include which of the following?

- Debit cash - Credit note payable

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

- Debit to cash - Credit common stock

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

- Increase assets - Increase retained earnings

What are the effects of providing services on account to customers?

- Increase retained earnings - Increase assets

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?

- Notes payable increases - Cash increases

Which of the following are external transactions?

- Purchasing inventory from suppliers - Purchasing inventory from suppliers - Paying salaries to employees - Borrowing money from the bank

Indicate which situations would require Zenda Company to record revenue in the current period. (Select all that apply.)

- Zenda performs services on account. - Zenda performs services for cash.

The type of information included in an account includes

- columns for debits and credits. - the account title.

Match the type of the accounting system with the method for posting journal entries. 1. Computerized System 2. Manual System A. Journal entries are instantly posted to the general ledger B. Journal entries are posted periodically to the general ledger

1. A 2. B

Match the account used for each type of transaction. 1. Revenue -- 2. Deferred Revenue -- a. Cash received from customers for services to be performed in the future b. Services performed for customers for cash or on account

1. B. 2. A.

Place the three steps for analyzing the effect of transactions in the correct order. 1. Determine one account in the accounting equation that will increase or decrease 2. Determine a second amount in the accounting equation that will increase or decrease 3. Confirm that assets are equal to liabilities plus stockholders' equity

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

Which type of account is increased with a debit?

Assets Dividends Expenses

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

Borrowing cash and signing a promissory note

Jeremy issues 5,000 shares of common stock for $10 per share. Which of the following accounts are affected? (Select all that apply.)

Cash Common stock

The last step for analyzing the effect of transactions is:

Confirm that assets are equal to liabilities plus stockholders' equity

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

Debit cash; credit revenue.

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

Debit cash; credit revenue.

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

Debit equipment Credit cash

Porter Company pays for three years of rent in advance. Which of the following is used to record this transaction?

Debit prepaid rent; credit cash.

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

Debit supplies; credit cash.

What is the effect of dividends on retained earnings?

Decrease

What is the effect of expenses on retained earnings?

Decrease

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

False

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

False

True or false: A balance sheet is a list of all accounts and their balances showing that debits equals credits.

False Reason: A trial balance is a list of all accounts and their balances showing debits equals credits. A balance sheet presents assets, liabilities, and stockholders' equity.

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? (Select all that apply)

February 15 & February 27

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

General ledger

When services are provided on account, what is the effect on stockholders' equity?

Increase

LMN Enterprises performs accounting services for a client for $3,000 cash. What is the effect on the accounting equation?

Increase assets and increase retained earnings

What effect does revenue have on retained earnings?

Increases

What is the effect of net income on retained earnings?

Increases retained earnings

Analyze the following postings. Which of the following is the transaction that required this posting?

Issue common stock to investors

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

Journal entries are instantly posted to the ledger

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

Ledger

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

Liabilities

On May 1, Ace Electronics ordered office equipment. The equipment was delivered to Ace on May 15, and Ace agreed to pay for it by the end of the month. Ace paid for the equipment on May 31. When will Ace make the first entry in its accounting system for this purchase?

May 15

Analyze the following journal entry. What is the transaction that required this journal entry?

Perform services for customer for cash

Analyze the following t-accounts. What is the transaction that required the posting of item (7)?

Perform services for customers on account

Analyze the following t-accounts and the posting marked item (3). What is the transaction that required this posting?

Purchase equipment for cash

Analyze the following t-accounts and postings for item (5). What is the transaction that required this posting?

Purchase supplies on account

Jonathan Company's journal shows a debit to supplies and a credit to accounts payable. This means that Jonathan:

Purchased supplies on account

Which of the following are stockholder equity accounts?

Retained earnings Common stock

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

True or false: Revenue is recorded when services are performed, whereas deferred revenue is recorded when cash is received from customers in advance before services are performed.

True

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

True

When should revenue be recorded?

When the services are performed

Which of the following is an external transaction?

Which of the following is an external transaction?

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

account; general ledger

The account deferred revenue is used to record

an obligation to perform services in the future.

Marcy receives $10,000 cash in advance from customers for services to be performed in the following year. This transaction would cause

assets to increase and liabilities to increase.

Accounts receivable are

assets.

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

borrowed $15,000 cash and signed a note

Analyze the following t-accounts. The transaction that required the posting for item (2) is

borrowing cash from the bank.

Slim purchases equipment with cash. The accounts affected are

cash and equipment.

The two components of stockholders' equity are

common stock and retained earnings.

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

credit to common stock.

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

Turkey Corp. provides services to customers on account for $3,000. Recording this transaction will include a

credit to revenues.

Sinclair purchased equipment for $100,000 cash. Recording this transaction would include a

debit to equipment $100,000. (Reason: the total cost of the equipment is $100,000)

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.

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

debit to supplies.

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

debits and credits.

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

Expenses will cause retained earnings to

decrease

When a company receives cash in advance from customers for services to be performed in the future, the transaction affects the ______ account.

deferred revenue

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

Credits increase revenues, whereas debits increase

expenses and dividends.

The types of accounts which affect retained earnings are

expenses. dividends. revenues.

Revenues cause retained earnings to

increase

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

issued shares to stockholders

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

journal

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

ledger

The term debit means to place the entry on the _______ hand side of the account, and the term credit means to place the entry on the _________ hand side of the account.

left & right

Stockholders' equity is increased by revenues because revenues increase

net income

Gondel Company's journal shows a debit to prepaid rent and a credit to cash. This means that Gondel Company

paid rent in advance.

Analyze the following t-accounts. What is the transaction that required the posting of item (4)?

pay rent in advance

DiAngelo Company's journal shows a debit to cash and a credit to service revenue. This journal entry indicates that DiAngelo:

performed a service for a customer for cash

The process of transferring information from the journal to the ledger is referred to as

posting

Pilot Company pays for two years of rent in advance. Recording this transaction would include a debit to

prepaid rent

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

prepaid rent.

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.

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

purchased equipment and signed a note for the purchase price

Cray purchases equipment for cash. Total assets will

remain the same.

Prepaid rent is

rent paid in advance.

Consistent with the __________ recognition principle, companies record revenue at the time goods are provided to customers. (Enter only one word.)

revenue

The two basic components for calculating net income are ________ and _________ (Enter one word per blank.)

revenues & expenses

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

t-account

Accounts receivable are assets which represent

the amounts owed by customers.