Accounting Ch 2

Gunner Company purchased a piece of equipment costing $6000. $1000 is paid immediately and the balance is on account. Show how to record this transaction to the T-accounts

$6000 on left side of the Equipment account; $5000 on the right side of the Accounts payable account; $1000 on the right side of the Cash account

List only examples of assets

Building, cash, accounts receivable

Liabilities

Claims against the assets of a business

A business paid $40 to it's stockholders. Show how to record the transaction to the T-accounts: Dividends would be _______ on the ______ side of the T-account and Cash would be ______ on the _____ side of the T-account.

debited; left; credited; right

Butter Company purchased $300 of supplies for cash. Illustrate how to record the transaction into T-accounts by completing the following sentence: The Supplies account would be ______ on the ______ side of the T-account and the Cash account would be ________ on the ________ side of the T-account.

debited; left; credited; right

J. Brown paid $40 to its stockholders. Show how to record the transaction to the T-accounts by completing the following sentence: Dividends would be _______ on the _______ side of the T-account, and cash would be _________ on the ________ side of the T-account

debited; left; credited; right

To enter transactions on the left side of a T-account means you are _______ the account and will cause a(n) ______ in an asset account

debiting; increase

A business pays $500 for rent. How would this payment affect the equity of a business?

Expenses are increased, so equity is decreased

Which is correct regarding posting a transaction?

Posting means to transfer journal information to a ledger

Stockholders' equity

The residual interest in the assets of a business after deducting the business's debts

Assets

Things of value owned by a business

Assets

Things of value owned by the business

Brown Company provided services to a customer and immediately collected $1900 cash. Show how to record the transaction to the T-accounts by completing the following sentence: Service Revenue would be ______ on the ______ side of the T-account, and Cash would be ________ on the _______ side of the T-account

credited; right; debited; left

On Mar 3, Lyons Company received $100 cash in advance of providing catering services to a customer. Use your knowledge of what a correct journal entry should look like to identify what would be included in the correct journal entry

-Cash would be debited and listed first -Unearned Revenue would be credited and listed second

Which of the following would be included on an income statement?

-Net income -Total expenses -Total revenues

Which statements are accurate regarding supplies?

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

Which of the following statements is accurate about the Land account?

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

What is correct regarding the posting process?

-The posting process creates a link between the ledger and the journal -The posting process does not require detailed explanations in the ledger -Entries are posted as soon as possible -Entries must be posted to the ledger before financial statements are prepared

Recall that the Balance Sheet reports the equality of the accounting equation and would include which of the following amounts?

-Total Assets -Retained earnings balance at the end of period -Total Liabilities

The general ledger can be used to determine which of the following

-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

You are entering a transaction in the journal. Place the following steps in the order that they would be entered in the journal

1. Enter date of transaction in date column 2. Enter name of account(s) debited and their amount(s) 3. Enter name of account(s) credited and their amount(s) 4. Enter explanation

Illustrate how the financial statements are linked by placing them in the correct order of preparation

1. Income statement 2. Statement of retained earnings 3. Balance sheet

Recall the required information in a financial statement heading.

1. Name of business 2. Name of financial statement 3. Period of time the financial statement covers

Equipment is a(n) _______ account. It is reported on the ______ side of the accounting equation and is ______ when equipment is purchased.

Asset; left; increased

What is the formula depicting the expanded accounting equation?

Assets = Liabilities + Common stock - Dividends + Revenues - Expenses

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

Common stock and revenues

Jeff invests an additional $100 into his company from his personal checking account. How would this affect the equity of his business?

Common stock would be increased and total equity would also increase

What is correct regarding the effect of debits and credits in accounts?

Expenses reduce equity, so to increase an expense account you would debit it

What would have a normal debit balance?

Expenses, Dividends, Cash

The statement of retained earnings reports:

How retained earnings changed over a period of time

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

If the total of the right side of the accounting equation increased, the the total of the left side of the accounting equation must also increase

Creditors

Individuals or organizations that have rights to receive payments from a business

A journal

It is a book of original entry that includes a chronological record of all transactions that have occurred with a business during a period occurred

A general ledger

It is a collection of all accounts with their activity and balances that exist in a business

A 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

A trial balance

It is a list of each account and its balance at any given time and is used to verify that debits=credits

Expenses

The costs of doing business

Revenues

The dollars earned because of services performed or products sold

Liabilities

The obligations owed by the business to creditors

What is the purpose of the Common stock account?

When an owner invests in a business, the invested amount is recorded in the Common stock account

Which of the following accounts are examples of expenses? a) Rent expense b) Dividends c) Accounts payable d) Supplies expense

a + d

Prepaid accounts are _________ that represent prepayments of future expenses and are increased with a ______________

assets; debit

Which of the following statements are correct regarding the sides of a T-account? a) Liability accounts will be increased on the left side b) The left side is called the debit side c) Asset accounts will be increased on the left side d) The left side is called the credit side e) Asset accounts will be increased on the right side f) Liability accounts will be increased on the right side g) The right side is called the credit side

b, c, f, g

Which of the following accounts are examples of revenues? a) Accounts receivable b) Fees earned c) Accounts payable d) Service revenue e) Sales

b, d, e

Pintel Company paid $2000 cash for a 12 month insurance policy. Describe how to record the transaction to the T-accounts by completing the following sentence: Cash would be ________ on the _______ side of the T-account, and Prepaid Insurance would be ______ on the _______ side of the T-account.

credited; right; debited; left

Since expenses are the costs of doing business and cause equity to _______, expenses are increased on the ______ side of their T-account

decrease; left

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

decreases

The Dividends account is used to record _________ to the owner and has a ________ impact on equity

distributions; negative

The statement of retained earnings report:

how retained earnings changed over a period of time

Revenues cause equity to _____ and they are increased on the _____ side of the T-account.

increase; right

A trial balance is a ___________ 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.

list; credit

What is required info when entering a transaction into a journal?

-Credited accounts -Explanation of transaction -Debited accounts -Date of the transaction

When preparing a trial balance, there are certain steps that need to be followed. List the steps in the correct order

1. List each account title and its amount from the general ledger 2. Compute the total of debit balances and the total of credit balances 3. Verify that total debit balances equal total credit balances 4. Locate and resolve errors

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

What is a creditor

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

What is correct in regards to debiting and crediting an account?

A debit or a credit can increase an account, depending on what kind of account it is

What is accurate regarding Accounts payable?

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

Gunner Company made a $50 payment on account for a previous equipment purchase. Show how this transaction should be entered into T-accounts of Gunner Company.

Place $50 on left side of the Accounts payable account; place $50 on the right side of the Cash account

Which of the following statements about revenues is correct?

Revenues cause equity to increase, and they are increased on the right side of the T-account

The business earns $2800 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 are correct regarding a T-account? a) A T-account may be used as a tool to visualize the effects of a transaction b) A T-account will show the debit or credit side of each transaction c) A T-account represents a ledger account d) A T-account reflects whether a transaction was posted correctly

a, b, c

Which of the following would be included on a statement of retained earnings? a) Retained earnings balance at end of period b) Retained earnings balance at beginning of period c) Total liabilities d) Dividends e) Net Income (loss) f) Total revenues earned during the period g) Total assets

a, b, d, e

Which or the following would be considered "cash" and reflected in a company's Cash account? a) Coin b) Prepaid insurance c) Checks d) Money orders e) Notes Receivable

a, c, d

Select the statements that are true regarding debiting and crediting: a) A debit can increase an expense account b) For an account where a debit is an increase, the credit is a decrease c) A credit will always decrease an asset account d) A debit or a credit can increase or decrease an account, depending on the account

a, c, d, e

Which of the following accounts has a normal debit balance? a) Buildings b) Accounts payable c) Supplies d) Cash e) Accounts receivable f) Unearned revenue

a, c, d, e

Which of the following statements are correct? a) Crediting the Common stock account means to increase it b) Crediting means to enter transactions on the left side of a T-account c) Crediting can be abbreviated "Cr" d) Crediting means to enter transactions on the right side of a T-account e) Crediting a liability account will increase it

a, c, d, e

Which of the following has a normal credit balance? a) Common stock b) Prepaid insurance c) Accounts receivable d) Supplies e) Accounts payable f) Unearned consulting revenue

a, e, f

Given the descriptions below, which are true regarding notes receivable? a) Note receivable is increased when payment is received from the maker of the note b) Notes receivable is classified as a liability c) Another name for a note receivable is a promissory note d) Notes receivable is decreased with a credit e) It is the promise of another entity to pay a definite sum of money on a specified future date f) Notes receivable is classified as an asset

c, d, e, f

Holt Computer Services received $200 from a customer that it had billed earlier in the month. Illustrate how to record the transaction to the T-accounts by completing the following sentence: Accounts receivable would be _______ on the ______ side of the T-account, and Cash would be ______ on the ______ side of the T-account.

credited; right; debited; left

The T-account for Cash had 3 transactions entered into it. It was increased by $400 and decreased by $100 and by $30, respectively. Its balance at the end of the period would be a ______ balance of $_______

debit; 270

L. Lyons started a business and invested $4000. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be ______ on the _______ side of the T-account and the Common stock account would be ______ on the _______ side of the T-account

debited; left; credited; right

Pauline Company provided $500 of services to its client, Republic Company and received cash immediately. Show how to record the transaction to the T-accounts of Pauline Company by completing the following sentence: Cash would be _______ on the _______ side of the T-account and Services Revenue would be _______ on the _________ side of the T-account

debited; left; credited; right