Financial Accounting CH.1-3

Providing services to customers on account for $100 is recorded as:

Accounts Receivable 100 Service Revenue 100

A trial balance can best be explained as a list of:

All accounts and their balances at a particular date.

Resources of a company are referred to as:

Assets.

Which financial statement shows that a company's resources equal claims to those resources?

Balance sheet.

Which of the following describes the information reported in the statement of stockholders' equity?

Change in stockholders' equity through changes in common stock and retained earnings.

On January 17, Papa's Pizza signs a contract with Bug Zappers for exterminating services related to a recent sighting of cockroaches in the restaurant. Papa's pays for the extermination service on January 29, and Bug Zappers sprays for bugs on February 7. According to the matching principle, on which date should Papa's Pizza record the extermination expense?

February 7 (date of extermination service).

Based on the introductory section of this chapter, which course is most like financial accounting?

Foreign language.

The body of rules and procedures that guide the measurement and communication of financial accounting information is known as:

Generally Accepted Accounting Principles (GAAP).

Which financial statement conveys a company's ability to generate profits in the current period?

Income statement.

Which of the following causes the accounting equation not to balance?

Increase assets; increase dividends.

Ambassador Hotels purchases one year of fire insurance coverage on December 1 for $24,000 ($2,000 per month), debiting Prepaid Insurance. On December 31, Ambassador would record the following year-end adjusting entry:

Insurance Expense 2,000 Prepaid Insurance 2,000

Which of the following transactions causes an increase in total assets?

Issue common stock in exchange for cash.

Why does financial accounting have a positive impact on our society?

It allows investors and creditors to redirect their resources to successful companies and away from unsuccessful companies.

Refer to the information in Self-Study Question 2. Using cash-basis accounting, on which date should Papa's Pizza record the extermination expense?

January 29 (date of cash payment).

Refer to the information in Self-Study Question 1. Using cash-basis accounting, on which date should Johnson record service revenue?

May 10 (date of cash receipt)

On May 5, Johnson Plumbing receives a phone call from a customer needing a new water heater and schedules a service visit for May 7. On May 7, Johnson installs the new water heater. The customer pays for services on May 10. According to the revenue recognition principle, on which date should Johnson record service revenue

May 7 (date of service).

Financial accounting serves which primary function(s)?

Measures business activities. b. Communicates business activities to interested parties. c. Makes business decisions on behalf of interested parties. d. Both a. and b. are functions of financial accounting.

Which of the following represents an external transaction?

Payment of utility bill.

Which of the following transactions causes an increase in stockholders' equity?

Provide services to customers on account.

Which of the following is not a characteristic of adjusting entries?

Reduce the balances of revenue, expense, and dividend accounts to zero.

What are the two fundamental qualitative characteristics identified by the Financial Accounting Standards Board's (FASB) conceptual framework?

Relevance and faithful representation.

Sales of products or services are referred to as:

Revenues.

Which of the following accounts is not listed in a post-closing trial balance?

Salaries Expense.

A credit is used to increase which of the following accounts?

Service Revenue.

Which of the following describes the purpose(s) of closing entries?

Transfer the balances of temporary accounts (revenues, expenses, and dividends) to Retained Earnings. c. Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.

Posting is the process of:

Transferring the debit and credit information from the journal to individual accounts in the general ledger.

A debit is used to increase which of the following accounts?

Utilities Expense.

Which of the following is not a step in the process of measuring external transactions?

a. Analyze the impact of the transaction on the accounting equation. b. Record the transaction using debits and credits. c. Post the transaction to the T-account in the general ledger. d. All of the above are steps in the measurement process of external transactions

What is a benefit to a career in accounting?

a. High salaries. b. Wide range of job opportunities. c. High demand for accounting graduates. d. All of the above

An adjusted trial balance:

a.Lists all accounts and their balances at a particular date after updating account balances for adjusting entries. b. Is used to prepare the financial statements. c. Includes balances for revenues, expenses, and dividends. d. All the above.