Chapter 2 Financial Accounting

provided goods or services to a customer

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

False

A balance sheet is a list of all accounts and their balances showing that debits equal credits.

journal

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

Left

A debit is on the _____ side of the account.

chronological record of all transactions affecting a firm

A journal provides a

False

A ledger provides chronological record of all transactions affected the firm.

trial balance

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

T-account

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

debits; credits

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

the amount owed by customers

Accounts receivable are assets which represent

account; general ledger

An _____ is maintained for each financial statement item, whereas a _____ contains all of the accounts of the company.

External

An _____ transaction involves an exchange between the company and a separate economic entity.

debits and credits

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

True

An external transaction is a transaction the firm conducts with a separate economic entity.

Issue common stock to investors

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

Revenue

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

expenses and dividends

Credits increase revenues, whereas debits increase

debit

In a double-entry accounting system, a _____ represents the left side of the account.

purchased equipment and signed a note for the purchase price

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

issued shares to stockholders

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

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

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

Increase

Revenues cause retained earnings to

1. debit to cash 2. credit common stock

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

1. debit cash 2. credit note payable

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

1. columns for debits and credits 2. the account title

Select all that apply. The type of information included in an account includes

borrowed $15,000 cash and signed a note

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

common stock

Tabor Company issues $20,000 of common stock to investors. Recording this transaction will include a credit to

Stockholders' Equity

The accounting equation is: Assets = Liabilities + _____

Posting

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

provide in a single location the list of transactions affecting each account and the account's balance

The purpose of a general ledger is to

revenues and expenses

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

1. Measure business activities of the company 2. Communicate information to external parties for decision making purposes

The two roles of financial accounting are to:

Revenue, expenses, and dividends

What are the three components of retained earnings?

Increases retained earnings

What is the effect of net income on retained earnings?

Accounts Receivable

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?

revenues and expenses

Which of the following are components of calculating net income?

1. Retained earnings 2. Common stock

Which of the following are stockholder equity accounts?

General ledger

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

Journal entries are instantly posted to the ledger

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

Expense

Which type of account is increased with a debit?