ACCOUNTING 101- Chapter 2

Which of the following statements is (are) correct regarding the definition of a liability? (Check all that apply.)

A liability is a debt owed by the business. A liability is a claim by creditors against the assets of a business. A liability can be settled by transferring assets or providing products or services to others.

Which of the following statements explains what a trial balance is?

A trial balance confirms that the sum of debit account balances equals the sum of credit account balances.

Which of the following statements is (are) accurate regarding equipment purchased within a business? (Check all that apply.)

Equipment is reported on the left side of the accounting equation. Equipment is an asset. Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed. Equipment purchases are reported on the balance sheet.

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) (increase/decrease)in total liabilities or (equity/assets)

Increase equity

Which of the following accounts would be considered an asset? (Check all that apply.)

Accounts receivable Supplies Cash Building

Which of the following statements is the best definition of an asset?

Assets are resources owned or controlled by a company and that have expected future benefits.

An annual insurance policy is paid in advance by a company. How will the company treat this initial payment and the subsequent expiration of a portion of the policy over time? (Check all that apply.)

As a portion of the policy expires, the expired portion will be removed and transferred to an expense account. The initial payment will be recorded as an increase to a Prepaid Insurance account. Over time, the expired portion of the policy must be removed from the asset account as it has been used up and is no longer considered an asset

When financial statements are prepared, unexpired prepaid accounts are recorded as (expenses/assets/liabilities) and the expired portion of the prepaid account is reported as a(n) (expense/asset/liability).

Assets and expense

J. Jackson invested $1,000 in his business. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit Cash; credit Owner, Capital.

Which of the following accounts impact equity? (Check all that apply.)

Owner, Capital Expenses Owner, Withdrawal Revenue

Which of the following best and fully describes a general ledger?

The general ledger is a record containing all accounts used by a company.

Which of the following statements are accurate regarding supplies? (Check all that apply.)

Unused supplies are treated as assets. Unused supplies can be recorded as Store Supplies, Office Supplies or Supplies. When supplies are purchased, they are added to the Supplies account. Supplies are assets until they are used.

Choose the statement below that correctly explains a general journal..

A journal is a complete record of each transaction in one place and includes the debit and credit of each transaction.

Which of the following statements is the correct definition of a liability?

A liability is a claim by a creditor against the assets of a business.

Notes receivable is considered a(n) (asset/liability).

Asset

Equipment is a(n) (asset/liability/expense) account. It is reported on the (left/right) side of the accounting equation and is (increased/decreased) when equipment is purchased.

Asset left increase

Prepaid accounts are (assets/liabilities) that represent prepayments of future expenses and are increased with a (debit/credit).

Assets debits

True or false: Assets are claims (by creditors) against the company.

False

True or false: The cost of land owned by a business is recorded in the Land account and this account is classified as an expense.

False

Select the statement below that best defines prepaid accounts.

Prepaid accounts are assets that represent prepayments of future expenses.

The business earns $700 of consulting revenue. How would these earnings affect the total equity of a business?

Revenues increase, so total equity is increased.

The business earns $2,800 cash for services performed. How would this receipt affect the total equity of a business?

Revenues would be increased, so equity is increased.

Which of the following statements is (are) correct regarding a journal? (Check all that apply.)

Transactions are generally entered in chronological order. A journal is used to record business transactions. In a journal, both the debit and credit side of the transaction can be seen.

An account is a record of increases and ______ in a specific asset, liability, equity, revenue or expense.

Decrease

An income statement reports:

the revenues less the expenses incurred by a business

The general ledger can be used to determine which of the following (select all answers which apply):

which accounts are being used by a company and their balances at any given time. common and unique accounts used by a business. increases and decreases in all accounts in a business.

Which of the following statements is the correct definition of a creditor?

A creditor is an individual or organization that has a right to receive payments from a business

The correct definition of an "account" includes which of the following?

A record of increases and decreases in a specific asset, liability, equity, revenue, or expense.

Which of the following is the best definition of a source document in the accounting process?

A source document identifies and describes transactions and is the basis for entering an event into the accounting system.

Which of the following statements is accurate regarding Accounts payable?

Accounts payable refer to promises to pay later, which may arise from the purchase of supplies or services.

Which statement is correct regarding entering transactions into the accounting equation?

After recording a transaction, the total of the right side of the accounting equation must equal the total of the left side of the accounting equation.

Assets revenues liabilities owner equity

Assets matches Choice, Things of value owned by the businessThings of value owned by the business Owner's equity matches Choice, The residual interest in the assets of a business after deducting the business's debtsThe residual interest in the assets of a business after deducting the business's debts Revenues matches Choice, The dollars earned because of services performed or products soldThe dollars earned because of services performed or products sold Liabilities matches Choice, The obligations owed by the business to creditorsThe obligations owed by the business to creditors

Which of the following would be included on an income statement? (Check all that apply.)

Net income Total revenues Total expenses

Which of the following statements is (are) correct regarding a T-account? (Check all that apply.)

A T-account will show the debit and credit effects of transactions. A T-account may be used as a tool to visualize the effects of a transaction. A T-account represents a ledger account.

Accounts payable refer to promises to pay later by the business and are classified as a(n) (asset/liability/expense) account.

Liability

Which of the following statements correctly explains how to prepare a trial balance? (Check all that apply.)

List each account title and its amount from the ledger. Verify that the total debit balances equals the total credit balances. Compute the total of debit balances and the total of credit balances. If an account has a zero balance, it may be omitted entirely.

A trial balance is a(n) (list/balance/chart) of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of account balances. Use one word for each blank.

List, credit

Which of the following statements is the correct definition of owner's equity?

Owner's equity is the owner's claim on a company's assets.

Which of the following statements is accurate about the Land account? (Check all that apply.)

The Land account is an asset. The Land account is increased on the left side of its T-account. The Land account is used to record the costs of land purchased by the business.

The general ledger can be used to determine which of the following (select all answers which apply):

increases and decreases in all accounts in a business. common and unique accounts used by a business. which accounts are being used by a company and their balances at any given time.

Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash.

Coins, checks, money orders

creditors liabilities assets and expenses

Creditors , Individuals or organizations that have rights to receive payments from a businessIndividuals or organizations that have rights to receive payments from a business Liabilities Claims against the assets of a businessClaims against the assets of a business Assets Things of value owned by a businessThings of value owned by a business Expenses The costs of doing businessThe costs of doing business

Identify which of the following lists include only examples of assets.

Building, cash, accounts receivable

Which statement best describes a T-account?

A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions.

Supplies are (assets/expenses/liabilities) until they are used. When they are used up, their costs are reported as (assets/expenses/liabilities).

Assets and expenses

Which of the following statements is the best definition of the Chart of Accounts?

It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account.

Which of the following items would be considered "cash" and reflected in a company's Cash account? (Check all that apply.)

Money orders Checks Coin

Given the descriptions below, which is (are) true regarding notes receivable? (Check all that apply.)

Notes receivable is classified as an asset. Another name for a note receivable is a promissory note. It is the promise of another entity to pay a specific sum of money on a specified future date.

Given the descriptions below, which is (are) true regarding notes receivable? (Check all that apply.)

Notes receivable is classified as an asset. It is the promise of another entity to pay a specific sum of money on a specified future date. Another name for a note receivable is a promissory note.

There are several types of accounts that impact equity. Which of the accounts below cause equity to increase?

Owner's capital and revenues