acctg-201 chapter 2

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

False

Accounts receivable are

a component of net income and retained earnings.

On January 1, Linden has total assets of $100,000, total liabilities of $30,000, and total stockholders' equity of $70,000. Linden purchases $20,000 of supplies on account, and $2,000 of prepaid rent for cash. After these transactions, total assets equal

$120,000

Long issued 5,000 shares of stock for $10,000. Long used $2,000 of the proceeds to purchase supplies, and borrowed $8,000 cash from the bank. Long's total assets are

$18,000

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 components of calculating net income?

- expenses - revenues

The types of accounts which affect retained earnings are

- expenses. - revenues. - dividends.

Which of the following are stockholder equity accounts

- retained earnings - common stock

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.

True

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

True

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?

accounts receivable

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

blank 1: trial blank 2: balance

A journal provides a

chronological record of all transactions affecting a firm.

The two components of stockholders' equity are

common stock and retaining earnings.

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

debit

Which type of account is increased with a debit?

expense

Credits increase revenues, whereas debits increase

expenses and dividends.

A(n) ___ transaction involves an exchange between the company and a separate economic entity. (Enter one word per blank)

external

Revenues cause retained earnings to

increase.

Net income ___ retained earnings.

increases

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

A debit is on the ___ side fo the account.

left

The accounting equation is: Assets = ___ + Stockholders' Equity

liabilities

The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as ___. (Entering only one word.)

posting or post

The process of transferring information from the journal to the 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.

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

revenue

What are the three components of retained earnings?

revenues, expenses, and dividends

The accounting equation is: Assets = Liabilities +

stockholders' equity

Accounts receivable are assets which represent

the amount owed by customers.