Accounting Ch.2 Questions
Which of the following are external transactions
1) Borrowing money from the bank 2) Paying salaries to employees 3) Purchasing inventory from suppliers
Geo Corporation issues stock to investors for $100000. Recording this transaction will include which of the following?
1) Credit common stock 2) Debit to cash
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
Shannon Corporation issues common stock for $25000. Recording that transaction will include a:
Credit to common stock
Carnival Company issues common stock to investors for $50,000. Which of the following is used to record this transaction
Debit cash, credit common stock
Which type of account is increased with a debit
Expense
True or false: a ledger provides a chronological record of all transactions affecting the firm
False - Reason: A journal is what provides a chronological record of the transactions of a firm
Which of the following contains a list of transactions affecting each account and the account's balance
General ledger
What is the effect of net income on retained earnings (increase or decrease)
Increases retained earnings
The accounting equation is: Assets = ____________ + ______________
Liability + Stockholders' Equity
Smith Company's journal shows a debit to cash and a credit to notes payable both for $15000. This indicates that Smith Company:
Paid a loan in the amount of $15000
Manual system
journal entries are posted periodically to the general ledger
An ____________ is maintained for each financial statement item, whereas a ___________ ___________ contains all of the accounts of the company
account, general ledger
An ____________ is maintained for each financial statement item, whereas a ______________ _______________ contains all of the accounts of the company
account, general ledger
An account should have an account title, account number, a place for the date of the transaction, and two columns for:
debts and credits
Dividends paid to stockholders will cause retained earnings to (increase or decrease)
decrease
Revenues cause retained earnings to (increase or decrease)
increase
Which of the following includes the list of transactions affecting each individual account and the account's balance
ledger
Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company
provided goods or services to a customer
Which of the following is an external transaction
purchasing supplies from a vendor
A simplified version that is used informally for analysis instead of drawings a formal general ledger account is referred to as a
t-account
A list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a ___________ ______________.
trial balance
The type of information included in an account includes
1) the account title 2) columns for debits and credits
Identify the three components of retained earnings
1) Revenues 2) Dividends 3) Expenses
True or False: The two functions of financial accounting are to measure business activities and prepare tax returns
False - Reason: The two functions of financial accounting are to measure business activities and communicate those measurements to external parties for decision-making purposes.
A chronological record of all economic events affecting a firm and recorded in a ____________
journal
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
Consistent with the __________ recognition principle, companies record revenue at the time goods are provided to customers
revenue
Pluto Inc. borrows $3000 from Second Nationals Bank by singing a promissory note. Recording this transaction will include which of the following
1) Credit note payable 2) debit cash
Which of the following are stockholder equity accounts
1) common stock 2) retained earnings
Carnival Company issues common stock to investors for $50000. Which of the following is used to record this transaction
Debit cash, credit common stock
What is the effect of dividends on retained earnings (increase or decrease)
Decrease
Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicated that Klick
issued shares to stockholders
Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicates that Klick:
issued shares to stockholders
Computer system
journal entries are instantly posted to the general ledger
The two roles of financial accounting are to
1) measure business activities of the company 2) communicate information to external parties for decision making purposes
What are the three components of retained earnings
1) revenues 2) expenses 3) dividends
Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicates that Kick
issued shares to stockholders
Roland Corporation borrows $10,000 from the bank by signing a promissory note. Recording this transaction will include:
1) credit to notes payable 2) debit to cash
The two components of stockholders' equity are
Common stock and retained earnings
True or False: A balance sheet is a list of all accounts and their balances showing debits equals credits. A balance sheet presents assets, liabilities, and stockholders' equity
False - Reason: A trial balance is a list of all accounts and their balances showing debits equals credits. A balance sheet presents assets, liabilities, and stockholders' equity
True or false: A ledger provides a chronological record of all transactions affecting the firm
False: It is really a journal that provides a chronological record of the transactions of a firm
Tabor Company issues $20000 of common stock to investors. Recording this transaction will include a credit to:
common stock
Two components of stockholders' equity are
common stock and retained earnings
Shannon Corporation issues common stock for $25000. Recording this transaction will include a
credit to common stock
Credits increase revenues, whereas debits increase
expenses and dividends
Which of the following are components of calculating net income
expenses and revenues
What effect does revenue have on retained earnings (decrease or increase)
increase
The term debit means to place the entry on the ________ hand side of the account, and the term credit means to place the entry on the __________ hand side of the account.
left, right
The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as ___________
posting
Accounts receivable are assets which represents
the amounts owned by customers
