acct. chapter 2 quiz

What are the three components of retained earnings?

Revenues, expenses, and dividends

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

debit cash; credit retained earnings

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

debit to equipment $100,000.

Credits increase revenues, whereas debits increase

expenses and dividends

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

false

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

general ledger

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 share to stockholders

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

posting

True or false: For each journal entry, debits must be equal to credits.

true

True or false: After posting all journal entries to accounts. the sum of accounts with debit balances should equal the sum of accounts with credit balances.

true

The accounting equation is:

Assets = Liabilities + Stockholders' Equity

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

Credit note payable Debit cash

The two components of stockholders' equity are

common stock and retained earnings

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

debits and credits

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

false

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

Debit supplies; credit cash.

Which of the following are components of calculating net income?

Expenses Revenues

Which of the following are external transactions?

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

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

account; general ledger

The type of information included in an account includes

columns for debits and credits. the account title.

Which of the following are stockholder equity accounts?

common stock retained earnings

The two roles of financial accounting are to:

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

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

credit to common stock

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

debit to supplies

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)____

debit; credit

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

debit; credit

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

debits; credits

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

false

Transactions that are typically recognized at the end of the period and do not include an exchange with a separate company are referred to as ___ transactions

internal

Transactions that are typically recognized at the end of the period and do not include an exchange with a separate company are referred to as

internal transactions

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

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

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

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

posting

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

revenue

Which type of account is increased with a credit?

revenue

The two basic components for calculating net income are ___ and ___

revenues expenses

The types of accounts which affect retained earnings are

revenues. expenses. dividends.

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

t-account

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

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

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

What effect does revenue have on retained earnings?

increases

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.