Chapter 2 SmartBook
What effect does revenue have on retained earnings?
increases
rory purchases supplies for cash. which of the following occurs
total assets remain the same
When services are provided on account, what is the effect on stockholders' equity?
increase
Net income ______ retained earnings.
increases
Klick's journal shows a debit to cash and a credit to common stock. This journal entry indicates that Klick:
issued shares to stockholders
list of all accounts and their balances at a particular date showing that debits equal credits is referred to as
trial balance
the accounting equation is
Assets = Liabilities + Owner's Equity
Shriver Corp. borrows $25,000 from a bank and signs a two-year promissory note. What accounts will be affected by this transaction and what is the effect?
Cash increases Notes payable increases
What are the effects of providing services on account to customers?
Increase assets Increase retained earnings
Accounts receivable are
assets
jeremy issues 5,000 shares of common stock for $10 per share. which of the following accounts are affected
common stock cash
An account should have an account title, account number, a place for the date of the transaction, and two columns for
debits and credits.
Dividends paid to stockholders will cause retained earnings to
decrease
What is the effect of dividends on retained earnings?
decrease
Stockholders' equity is increased by revenues because revenues increase
net income
Indigo Company's journal reveals that equipment was debited and notes payable was credited, both for $10,000. Indigo Company must have
purchased equipment and signed a note for the purchase price
an external transaction is a transaction the firm conducts with a separate economic entity
true
the accounting equation must always remain in balance
true
The two roles of financial accounting are to:
- communicate information to external parties for decision making purposes - measure business activities of the company
deferred revenue
Cash received from customers for services to be performed in the future
Which of the following are stockholder equity accounts?
Common stock Retained earnings
London Corp. issues 1,000 shares of stock for $20 per share. What are the effects of this transaction?
Common stock is increased. Cash is increased.
Farmer, Inc. purchases a tractor for $80,000 cash. Recording this transaction will require which of the following?
Credit cash Debit equipment
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.
Fuller Company provides services to customers for $25,000 cash. Which of the following is used to record this transaction?
Debit cash; credit revenue.
Torrence purchases supplies for cash. Which of the following is used to record this transaction?
Debit supplies; credit cash.
The first step for analyzing the effect of transactions is:
Determine one account in the accounting equation that will increase or decrease
On February 1, Domino Corporation ordered inventory. The inventory was received on February 15. Domino paid for the inventory on February 27. On which of the following dates will Domino record a transaction?
February 15 February 27
LMN Enterprises performs accounting services for a client for $3,000 cash. What is the effect on the accounting equation?
Increase assets and increase retained earnings
computerized system
Journal entries are instantly posted to the general ledger
manual system
Journal entries are posted periodically to the general ledger
revenue
Services performed for customers for cash or on account
When should revenue be recorded?
When the services are performed
Indicate which situations would require Zenda Company to record revenue in the current period
Zenda performs services for cash. Zenda performs services on account.
if a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?
a liability is decreased another asset is increased
When cash is received in advance for services to be performed at a later date, an asset is increased and
a liability is increased.
A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.
account; general ledger
the account deferred revenue is used to record
an obligation to perform services in the future.
Slim purchases equipment with cash. The accounts affected are
cash and equipment.
the last step for analyzing the effect of transactions is
confirm that assets are equal to liabilities plus stockholders' equity
Oasis Company provides services to customers for $10,000 cash. Which of the following is used to record this transaction?
debit cash credit revenue????
Roland Corporation borrows $10,000 from the bank by signing a promissory note. Recording this transaction will include:
debit to cash credit to notes payable
Sinclair purchased equipment for $100,000 cash. Recording this transaction would include a
debit to equipment $100,000.
Yeung Corp. purchases supplies on account. Recording this transaction will include a
debit to supplies.
What is the effect of expenses on retained earnings
decrease
What is the effect of expenses on retained earnings?
decrease
expenses will cause retained earnings to
decrease
When a company receives cash in advance from customers for services to be performed in the future, the transaction affects the ______ account.
deferred revenue
Crane purchases equipment by signing a note payable with the equipment dealer for $10,000. The accounts affected for Crane are
equipment and notes payable
Which type of account is increased with a debit?
expense
Credits increase revenues, whereas debits increase
expenses and dividends
The types of accounts which affect retained earnings are
expenses. dividends. revenues.
a _____________ transaction involves an exchange between the company and a separate economic entity
external
A balance sheet is a list of all accounts and their balances showing that debits equals credits.
false
A transaction is initially recorded in the journal, and then subsequently posted to the general
ledger
Which of the following includes the list of transactions affecting each individual account and the account's balance?
ledger
On May 1, Ace Electronics ordered office equipment. The equipment was delivered to Ace on May 15, and Ace agreed to pay for it by the end of the month. Ace paid for the equipment on May 31. When will Ace make the first entry in its accounting system for this purchase?
may 15
Gondel Company's journal shows a debit to prepaid rent and a credit to cash. This means that Gondel Company
paid rent in advance.
The process of transferring information from a journal entry to the specific accounts affected in the general ledger is referred to as
posting
Pilot Company pays for two years of rent in advance. Recording this transaction would include a debit to
prepaid rent
Rent paid in advance and classified as an asset is referred to as
prepaid rent
the purpose of a journal is to
record a chronological listing of every transaction for a company.
An increase in revenues increases net income, which results in an increase to:
retained earnings
consistent with the __________ recognition principle, companies record revenue at the time goods are provided to customers
revenue
An simplified version that is used informally for analysis instead of drawing a formal general ledger account is referred to as a:
t-account
Accounts receivable are assets which represent
Amounts owed by customers
In a double-entry accounting system, the _________ represents the left side of the account.
Debit
Pluto Inc. borrows $3,000 from Second National Bank by signing a promissory note. Recording this transaction will include which of the following?
Debit cash Credit note payable
Shannon Corporation issues common stock for $25,000. Recording this transaction will include a
credit to common stock.
Turkey Corp. provides services to customers on account for $3,000. Recording this transaction will include a
credit to revenues.
A ledger provides a chronological record of all transactions affecting the firm.
false
the two functions of financial accounting are to measure business activities and prepare tax returns
false
Which of the following contains a list of transactions affecting each account and the account's balance?
general ledger
Revenues cause retained earnings to
increase
DiAngelo Company's journal shows a debit to cash and a credit to service revenue. This journal entry indicates that DiAngelo:
performed a service for a customer for cash
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.
Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company
provided goods or services to a customer.
cray purchases equipment for cash. total assets will
remain the same
Revenue is recorded when services are performed, whereas deferred revenue is recorded when cash is received from customers in advance before services are performed.
true
Price Company provides cleaning services to customers for $10,000 cash. What are the effects of this transaction on the accounting equation?
Increase assets Increase retained earnings
Marcy receives $10,000 cash in advance from customers for services to be performed in the following year. This transaction would cause
assets to increase and liabilities to increase.
Analysis of Mueller Company's accounts show that as a result of a single transaction, both cash and notes payable increased by $10,000. Which of the following transactions would have caused this increase?
borrowing cash and signing a promissory note
Roslin Corp. provides services to customers on account for $5,000. Recording this transaction will include a
credit to revenues. debit to accounts receivable.
The type of information included in an account includes
the account title. columns for debits and credits.