Chapter 2 Questions
On December 7, Foster, Inc. paid a cash dividend of $1,700. The journal entry to record this transaction would include:
A debit to Dividends and a credit to Cash.
Which of the following events would not require a journal entry? A. Hiring a new director of human resources B. Borrowing cash from a bank and signing a note. C. Paying employees for wages earned D. Purchasing supplies on account
A. Hiring a new director of human resources
Vicki's Dance Studio bills a client for dancing lessons earned during the past week. The journal entry will include a credit to A. Service Revenue B. Cash C. Accounts Receivable D. Common Stock
A. Service Revenue
Reiner Company purchased $300 of equipment on account. The journal entry to record this transaction would include A. credit to Accounts Payable B. credit to Equipment C. No journal entry is required until the equipment is paid for. D. debit to Accounts Payable
A. credit to Accounts Payable
An account which is increased by a credit is A. a dividends account B. a liability account C. an expense account D. an asset account
B. a liability account
An account which is increased by a debit is a A. retained earnings account B. revenue account C. dividends account D. liability account
C. Dividends account
Stockholders invested $20,000 cash in a business for common stock. The journal entry to record this transaction would include A. A debit to Cash and a credit to Investment Income. B. A debit to Cash and a credit to Retained Earnings. C. A debit to Cash and a credit to Common Stock. D. A debit to Service Revenue and a credit to Cash.
C. A debit to Cash and a credit to Common Stock.
On April 28, Carter, Inc. received the $980 April utility bill, which will be paid at a later date. The journal entry to record this transaction would include A. A debit to Utilities Expense and a credit to Utilities Payable. B. A debit to Utilities Payable and a credit to Utilities Expense. C. A debit to Utilities Expense and a credit to Cash. D. No journal entry is needed at this time.
C. A debit to Utilities Expense and a credit to Cash.
On October 15, Grafton, Inc. received $400 from a customer in payment of a balance due for services billed on October 1. The entry by Grafton, Inc. will include a credit to A. Unearned Revenue B. Service Revenue C. Accounts Receivable D. Cash
C. Accounts Receivable
Dividends appear on the Income Statement (t/f)
False; they appear on the Statement of Retained Earnings
What accounts have a normal credit balance?
Revenue, accounts payable, common stock
Only accounts used for Net Income are
Revenues & Expenses
The Calculation for Net Income
Revenues - Expenses
What is the purpose of the journal?
The journal is used to list all the necessary information about a transaction in one place. The journal is the first accounting record of business transactions and is therefore referred to as a record of original entry.
What accounts have a normal debit balance?
assets, expenses, dividends
Revenues are always recorded as
credits
Expenses & Dividends are always recorded as
debits
Credits
decrease assets and increase liabilities
dividends has a normal credit balance
false
patent has a normal credit balance
false
utilities expense has a normal credit balance
false
What is the purpose of the general ledger?
is the foundation of company double-entry accounting system. Encompasses all transaction data needed to produce an income statement, balance sheet and other financial reports.
What is the chart of accounts?
list of accounts used by a company
What is posting?
the process of transferring the information in the journal to the appropriate ledger accounts
What does "normal balance" mean?
the side where increases in the account are recorded
What is the purpose of the trial balance?
to prove that debits equal credits
Cash has a normal debit balance
true
Dividends appear on Statement of Retained Earnings (T/f)
true
Expenses & Dividends decrease Retained Earnings (t/f)
true
accounts receivable has a normal debit balance
true
land has a normal debit balance
true
notes payable has a normal credit balance
true
retained earnings has a normal credit balance
true
service revenue has a normal credit balance
true
wages payable has a normal credit balance
true
Anytime customer is "billed", this means that...
you will debit Accounts Receivable