Chapter 3

Debit

The left side of an account.

General Journal

The most basic form of journal.

Journal

An accounting record in which transactions are initially recorded in chronological order.

General Ledger

A ledger that contains all asset, liability, stockholders' equity, revenue, and expense accounts.

Trial Balance

A list of accounts and their balances at a given time.

Chart of Accounts

A list of the names of a company's accounts.

Ledger

A record of all accounts, and their amounts, maintained by a company.

Double-Entry System

A system that records the two-sided effect of each transaction in appropriate accounts.

At December 1, 2022, Kingbird, Inc. Accounts Receivable balance was $19150. During December, Kingbird had credit sales of $51300 and collected accounts receivable of $41040. At December 31, 2022, the Accounts Receivable balance is: A.) $29410 debit B.) $29410 credit C.) $70450 debit D.) $19150 debit

A.) $29410 debit

In the first month of operations, the total of the debit entries to the Cash account amounted to $8540 and the total of the credit entries to the Cash account amounted to $4880. At the end of the month, the Cash account has a: A.) $3660 debit balance. B.) $8540 debit balance. C.) $3660 credit balance. D.) $4880 credit balance.

A.) $3660 debit balance.

On July 7, 2022, Novak Corp. received cash $1710 for services rendered. The entry to record this transaction will include: A.) a debit to Cash of $1710. B.) a credit to Accounts Payable of $1710. C.) a debit to Service Revenue of $1710. D.) a credit to Accounts Receivable of $1710.

A.) a debit to Cash of $1710.

Which accounts normally have debit balances? A.) assets, dividends, and expenses B.) assets, expenses, and revenues C.) assets, expenses, and retained earnings D.) assets, liabilities, and dividends

A.) assets, dividends, and expenses

Genesis Company buys equipment for $900 on credit. This transaction will immediately affect the: A.) balance sheet only. B.) income statement only. C.) income statement, retained earnings statement, and balance sheet. D.) income statement and retained earnings statement only.

A.) balance sheet only.

An accountant has debited an asset account for $1140 and credited a liability account for $570. What can be done to complete the recording of the transaction? A.) credit a different asset account for $570. B.) debit another asset account for $570. C.) nothing further must be done. D.) debit a stockholders' equity account for $570.

A.) credit a different asset account for $570.

If cash is received in advance from a customer: A.) liabilities will increase. B.) retained earnings will increase. C.) stockholders' equity will decrease. D.) assets will decrease.

A.) liabilities will increase.

Account

An individual accounting record of increases and decreases in specific asset, liability, stockholders' equity, revenue, or expense items.

Which of the following is the correct sequence of events? A.) Analyze a transaction; post it to the ledger; record it in the journal B.) Analyze a transaction; record it in the journal; post it to the ledger C.) None of the answer choices provides the correct sequence D.) Record a transaction in the journal; analyze the transaction; post it to the ledger

B.) Analyze a transaction; record it in the journal; post it to the ledger

All of the following statements regarding the double-entry system are true except: A.) when using the double-entry system, the sum of all debits to the accounts must equal the sum of all credits. B.) both sides of the accounting equation must be affected when recording a transaction using the double-entry system. C.) the double-entry system provides a logical method for recording transactions. D.) a two-sided effect of each transaction is recorded in appropriate accounts when using the double-entry system.

B.) both sides of the accounting equation must be affected when recording a transaction using the double-entry system.

When a company receives a utility bill but will not pay it right away, it should: A.) make no entry until the bill is paid. B.) debit Utilities Expense and credit Accounts Payable. C.) debit Accounts Payable and credit Utilities Expense. D.) debit Utilities Expense and credit Accounts Receivable.

B.) debit Utilities Expense and credit Accounts Payable.

The purpose of the ledger is to: A.) keep a record of documentation to support each transaction. B.) keep in one place all information about changes in specific account balances. C.) record chronologically the day's transactions. D.) make sure that all assets, liabilities, etc., have normal balances at all times.

B.) keep in one place all information about changes in specific account balances.

The Unearned Service Revenue account is classified as a(n): A.) revenue. B.) liability. C.) expense. D.) asset.

B.) liability.

At January 1, 2022, Oriole Company reported Retained Earnings of $392000. During 2022, Oriole had a net loss of $84000 and paid dividends to the stockholders of $56000. At December 31, 2022, the balance in Retained Earnings is: A.) $336000 credit. B.) $308000 debit. C.) $252000 credit. D.) $392000 debit.

C.) $252000 credit.

A journal provides: A.) the balances for each account. B.) information about a transaction in several different places. C.) a chronological record of transactions. D.) a list of all accounts used in the business.

C.) a chronological record of transactions.

What journal entry is recorded as a result of issuing stock to investors for cash? A.) a credit to Cash and a debit to Retained Earnings B.) a debit to Cash and a credit to Retained Earnings C.) a debit to Cash and a credit to Common Stock D.) a debit to Common Stock and a credit to Cash

C.) a debit to Cash and a credit to Common Stock

An investment by the stockholders in a business increases: A.) assets only. B.) liabilities and stockholders' equity. C.) assets and stockholders' equity. D.) assets and liabilities.

C.) assets and stockholders' equity.

If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates: A.) that all accounts reflect correct balances. B.) no errors have been made. C.) the mathematical equality of the accounting equation. D.) no errors can be discovered.

C.) the mathematical equality of the accounting equation.

Vaughn Manufacturing's trial balance reported the following balances at the end of its first year: Cash. $14280 Prepaid insurance. 710 Accounts receivable 3570 Accounts payable. 2860 Notes payable. 4280 Common stock. 5510 Dividends. 710 Revenues. 29580 Expenses. 17850 What amount did Vaughn Manufacturing's trial balance show as total credits? A.) $43650 B.) $41520 C.) $42940 D.) $42230

D.) $42230

If total liabilities increase by $5,000 then: A.) stockholders' equity increase by $5,000. B.) assets and stockholders' equity each increase by $2,500. C.) assets decrease by $5,000. D.) assets increase by $5,000, or stockholders' equity decrease by $5,000.

D.) assets increase by $5,000, or stockholders' equity decrease by $5,000.

Debits: A.) increase both assets and liabilities. B.) decrease both assets and liabilities. C.) decrease assets and increase liabilities. D.) increase assets and decrease liabilities.

D.) increase assets and decrease liabilities.

Accounting Transactions

Events that require recording in the financial statements because they affect assets, liabilities, or stockholders' equity.

T-Account

The basic form of an account.

Journalizing

The procedure of entering transaction data in the journal.

Posting

The procedure of transferring journal entry amounts to the ledger accounts.

Credit

The right side of an account.

Accounting Information System

The system of collecting and processing transaction data and communicating financial information to decision-makers.