ACG2021 Ch 3

A _______ balance occurs in an account if the total amount of credits exceeds the amount of debits

credit

What is the double-entry accounting system?

It requires that total debits (left) always equal total credits (right)

Which of the following is the sequence of events for the recording process? Prepare a trial balance; journalize; post Post; journalize; prepare a trial balance Journalize; post; prepare a trial balance Prepare a trial balance; post; journalize Post; prepare a trial balance; journalize

Journalize; post; prepare a trial balance

In what section of the statement of cash flows would the collection of cash from a customer who is paying in advance appear? Financing activities Banking activity Investing activities In the notes to the statement of cash flows Operating activities

Operating activities

If an account is debited in the journal entry, then the account balance is being increased. that account will be both debited and credited in the ledger. that account will be credited in the ledger. the transactions will not balance. that account will be debited in the ledger.

that account will be debited in the ledger.

If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates no errors can be discovered by any means. the mathematical equality of the accounting equation. every transaction has been recorded. no errors have been made. that all accounts reflect correct balances.

the mathematical equality of the accounting equation.

What is the first step in the accounting cycle?

We must first analyze the transaction that occurred.

At the start of the month, Hawaii Inc. reported retained earnings of $136,000. During the month, Hawaii generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the balance in retained earnings at the end of the month? $137,000 credit $136,000 debit $184,000 credit $142,000 credit $8,000 credit

$142,000 credit

Jarrell Company began the year with $109,000 in its Common Stock account and a debit balance in Retained Earnings of $14,000. During the year, the company earned net income of $33,000 and declared and paid $5,000 of dividends. In addition, the company sold additional common stock amounting to $37,000. Based on this information, what is the ending stockholders' equity? $146,000 $160,000 $9,000 $158,000 $132,000

$160,000 Ending retained earnings = Beginning retained earnings + net income - dividends. Ending retained earnings = $14,000 (debit balance) + $33,000 (i.e., credit Retained Earnings because of net income) - 5,000 (i.e., debit Retained Earnings because of dividends) = $14,000 (i.e., the $15,000 ending balance in Retained Earnings account is a credit balance). Ending common stock = beginning common stock + additional common stock issued Ending common stock = $109,000 + 37,000 = $146,000 Ending stockholders' equity = ending common stock + ending retained earnings. Ending stockholders' equity = $146,000 + $14,000 = $160,000

Wilson Company showed the following balances at the end of its first year: Accounts receivable, $7,000 Accounts payable, $1,000 Cash, $8,000 Common stock, ? Dividends, $1,000 Expenses, $17,000 Notes payable, $4,000 Prepaid insurance, $2,000 Revenues, $22,000 What did Wilson Company show as the balance of its common stock account? $26,000 $7,000 $17,000 $8,000 $13,000

$8,000 Assets = Liabilities + Common stock + Beg. retained earnings + Revenues - Expenses - Dividends (7,000 + 8,000 + 2,000) = (1,000 + 4,000) + Common stock + 0 + 22,000 - 17,000 - 1,000 Common stock = 8,000

The correct order of events is

1. Analyze the Transaction 2. Journal Entry 3. Post to Ledger 4. Trial Balance

In its first month of operations, a company's cash account has total debit entries amounting to $27,500 and total credit entries amounting to $24,900. At the end of the month, the cash account has a $2,600 debit balance. $2,600 credit balance. $$27,500 debit balance. $0 balance. $52,400 debit balance.

2,600 debit balance. $27,500 dr. − $24,900 cr. = $2,600 dr.

Which of the following occurs when an account payable is paid with cash? Stockholders' equity decreases and liabilities decrease Assets decrease and stockholders' equity increases Assets decreases and liabilities decrease Assets increases and liabilities decreases Assets increase and liabilities increase

Assets decreases and liabilities decrease

Which of the following best describes a chart of accounts A chart of accounts is the list of accounts allowed by the Financial Accounting Standards Board. A chart of accounts is the list of accounts deemed suitable for firms belonging to a particular industry. A chart of accounts is the list of a firm's accounts that have zero balances at a particular point in time. A chart of accounts is the list of a firm's accounts that have non-zero balances at a particular point in time. A chart of accounts is the list of the accounts in a given firm's ledger.

A chart of accounts is the list of the accounts in a given firm's ledger.

What journal entry is recorded as a result of issuing a note when borrowing money from a bank? A debit to Cash and a credit to Retained Earnings A debit to Cash and a credit to Notes Payable A debit to Notes Payable Stock and a credit to Cash A debit to cash and a debit to Common Stock A debit to Cash and a credit to Interest Expense

A debit to Cash and a credit to Notes Payable

Which of the following events is not recorded in a company's accounting records? A collection of cash in advance from a customer. A decision to offer a company's services in a new geographic area. The owner withdraws cash for personal use. A company prepays one year's insurance. Equipment is purchased on account.

A decision to offer a company's services in a new geographic area

An account is a part of a company's financial information system and is described by all except which one of the following? An account consists of three parts with one part being the account's title. The credit side is the right side of the account's T-account. The debit side is the left side of the account's T-account. An account has a debit and credit side. An account is a source document.

An account is a source document.

Which of these statements about a journal is false? It helps to locate errors because the debit and credit amounts for each entry can be readily compared. It discloses the complete effect of a transaction in one place. All of these are true. It provides a chronological record of transactions. It contains only revenue and expense accounts.

It contains only revenue and expense accounts.

Which pair of accounts follows the rules of debits and credits in relation to increases and decreases in the opposite manner? Cash and Accounts Receivable Service Revenue and Sales Revenue Inventory and Depreciation Expense Salaries Expense and Unearned Revenue Common Stock and Retained Earnings

Salaries Expense and Unearned Revenue

ledger

a collection of all T-accounts used by a particular business

trial balance

a list of accounts with their debit or credit balances. The accounts appear in the order they appear on the ledger

What is a T-account?

a useful approach to understanding the double-entry accounting system. Assets always increase in debits and liabilities/owner's equity increase in credits. An account consists of 3 parts: - a title - a debit side - a credit side exceptions: expenses and dividends

If a company pays for a one-year insurance policy that will expire next year, then assets increase and liabilities decrease. assets increase and assets decrease. assets increase and stockholders' equity increases. assets decrease and liabilities increase. liabilities increase and liabilities decrease.

assets increase and assets decrease.

If a company buys supplies on account, then assets increase and liabilities increase. assets increase and assets decrease. assets decrease and liabilities increase. assets increase and stockholders' equity increases. liabilities increase and liabilities decrease.

assets increase and liabilities increase

If a company receives cash from a customer before performing services for the customer, then assets increase and stockholders' equity increases. assets increase and stockhodlers' equity decreases. assets increase and liabilities increase. assets increase and liabilities decrease. assets decrease and liabilities increase.

assets increase and liabilities increase.

If a company receives cash from an owner in exchange for shares of the company's common stock, then assets increase and stockholders' equity increases. assets decrease and liabilities increase. assets increase and stockholders' equity decreases. assets increase and liabilities increase. assets increase and liabilities decrease.

assets increase and stockholders' equity increases.

Genesis Company buys equipment for $900 on credit. This transaction will immediately affect the income statement only. balance sheet only. cash flows statement only. income statement, retained earnings statement, and balance sheet only. income statement and retained earnings statement only.

balance sheet only.

A ________ balance occurs in an account if the total amount of debits exceeds the amount of credits

debit

When a trial balance balances, it is an indication that the account balances are correct. debits equal credits. the company has been profitable. all transactions have been journalized. all journal entries have been posted.

debits equal credits.

Employees have worked for one week and have earned $5,000 in wages. The company does not record wages until they are paid. Recording the payment of wages: increases liabilities and decreases liabilities. decreases assets and increases liabilities. decreases liabilities and decreases stockholders' equity. decreases assets and decreases stockholders' equity. increases stockholders' equity and decreases stockholders' equity.

decreases assets and decreases stockholders' equity.

Payment of a dividend increases cash and increases stockholders' equity. increases expenses and decreases cash decreases cash and decreases retained earnings. decreases cash and increases stockholders' equity. increases retained earnings and increases expenses.

decreases cash and decreases retained earnings.

chart of accounts

displays all the accounts a particular entity uses. It is listed in the following order: - assets - liabilities - stockholders' equity - revenues - expenses - dividends

Accounts with normal debit balances include expenses and assets. assets and liabilities. expenses and liabilities. stockholders' equity and revenues. liabilities and expenses.

expenses and assets.

The effects of performing services for cash on the basic accounting equation are to increase assets and decrease stockholders' equity. increase liabilities and increase stockholders' equity. decrease assets and decrease liabilities. increase assets and increase liabilities. increase assets and increase stockholders' equity.

increase assets and increase stockholders' equity

Issuing a 3-month, 10%, $10,000 note decreases retained earnings and increases assets. decreases assets and decreases liabilities. decreases liabilities and increases assets. increases assets and increases liabilities. decreases stockholders' equity and increases liabilities.

increases assets and increases liabilities. Issuing a note means that the company is borrowing money and signing a note payable as evidence of the loan. When a company borrows money by issuing a note, it receives cash but it also creates an obligation or a liability. This, assets increase because cash increases, and liabilities increase because notes payable increases.

Journal entries

lists debits first, followed by credits (indented)