Principles of Financial Accounting Chapter 2 Study

Transferring entries from the journal to the ledger is called?

Posting

Which of the following accounts are examples of revenues?

Service Revenue, Sales, Fees earned

Which of the following statements is (are) correct regarding a journal?

Transactions are generally entered in chronological order. A journal is used to record business transactions In a journal, both the debit and credit side of the transaction can be seen

At the end of the period, assets will still equal the liabilities plus equity

True

When financial statements are prepared, unexpired prepaid accounts are recorded as _______ and the expired portion of the prepaid account is reported as a(n) ______

assets; expenses

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) _______ in total liabilities and ______

increase; equity

Accounts receivable are ______ by credit sales and are _____ by customer payments

increased; decreased

The notes payable account is a(n) ________ account and is increased on the _____ side of the T-account.

liability; right

The rules of double-entry accounting say that for each transaction at least ______ accounts are involved, with at least one debit and one ______

two; credit

Match the item on the left with the term/item on the right

A general ledger: It is a collection of all accounts with their activity and balanced that exist in a business. A Journal:It is a book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occurred A trial balance: It is a list of each account and its balance at any given time and is used to verify that debits=credits A chart of accounts: It is a list of all ledger accounts which exist in a business and includes an identification number assigned to each account

Which of the following accounts would be considered an asset?

Accounts receivable Supplies Building Cash

Supplies are ______ until they are used. When they are used up, their costs are reported as______

Assets ; Expenses

Cash can take many forms. From the lists of items below, choose the one which includes only items that would be defined as cash

Coins, Checks, money orders

Which of the following accounts impact equity? (check all that apply)

Common stock Dividends Revenues Expenses

Which of the following accounts has a normal credit balance?

Common stock, Accounts payable, Unearned consulting revenue

Which of the selections below includes all of the required information to be entered in a journal?

Date of transactions, explanation of transaction, debited and credited accounts, dollar amounts of debits and credits

On Jan. 2, Callie Company performed $800 worth of services for a client. The client paid $800 immediately, but promised to pay the balance next month. The journal entry to record this transaction in Callie Taylor's books would include a ________ debit/credit) to the Cash account and a _______ (debit/credit) to the Service revenue account.

Debit, Credit

The T- account for Cash had 3 transactions entered into it. It was increased by $400 and decreased by $100 and by $30, respectively. Its balance at the end of the period would be a _____ (debit/credit) balance of ________$270.

Debit; $270

Brown Company paid its employee his weekly wages of $400, Show how to record the transaction to the T-Accounts by completing the following sentence. The wages expenses account would be ______ on the ______ side of the T-account, and the cash account would be ______ on the ______ side of the T-account

Debited, Left, Credited, Right

R&R Programming pays a $900 supply bill that it had received earlier in the month. Illustrate how to record the transaction to the T-accounts by completing the following sentence. Accounts payable would be _______ (debited/credited) on the IP _________ (left/right) side of the T-account, and Cash would be __________( debited/credited) on the ________ (left/right) side of the T-account

Debited; Left; Credited; Right

Which of the following statements is the best definition of an asset?

Assets are resources owned or controlled by a company and that have expected future benefits

Select the statement below that best defines prepaid accounts

Prepaid accounts are assets that represent prepayments of future expenses.

Which of the following statements is correct about prepaid expenses?

Prepaid expenses are also called prepaid account and are considered assets

Which of the following are examples of prepaid (expense) accounts?

Prepaid rent Prepaid insurance

Name the accounting document or report that is completed just prior to preparing financial statements and assists in preparing the financial statements.

Trial balance

The revenue recognition principle states that revenues should be recorded in the period in which it is earned which may or may not be in the period in which payment was actually received

True

Which of the following statements is (are) correct regarding unearned revenues?

Unearned revenue is a liability account which is set up when a customer pays in advance for a product or service Unearned revenues refer to a liability that is settled when a company delivers a product or preforms a service

Notes receivable is considered a(n)______

asset

The building account is a(n) _____ account and is reported on the _____ side of the accounting equation.

asset; left

Equipment is a(n) _______ account. It is reported on the ______ side of the accounting equation and is ______ when equipment is purchased.

asset; left; increased

The balance sheet reports:

assets, liabilities, and the ending retained earnings balance

Enter one word for each blank. The expanded accounting equation is: _______=________+common stock+_______- ______- dividends. Do not include the word accounts.

assets, liabilities, revenue, expenses

To enter transactions on the right side of a T-account means you will _____ the account and will cause a(n) ______ in a liability account

credit; increase

The account title is shown at the top of a T-account. The left side of a T-account is called the ______ side, and the right side is called the ______ side.

debit; credit

To enter transactions on the left side of a T-account means you will _____ the account and will cause a(n) ______ in a asset account

debit; increase

Brown Company paid $40 in cash dividends. Show how tor record the transaction by completing the following sentence. Dividends would be _____ on the ______ side of the T-account, and cash would be _______ on the ______ side of the T-account.

debited; left; credited; right

L. Lyons started a business and invested $4,000 in exchange for common stock. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The cash account would be _____ on the ____ side of the T-account and the common stock account would be _____ on the _____ side of the T-account.

debited; left; credited; right

The dividends account is used to record _____ by the owner and has a ________ impact on equity

dividends; negative

Holt computer services purchased $2000 of new equipment and paid immediately. Illustrate how to record the transaction into T-accounts by completing the following sentence

the equipment account would be debited on the left side of the T-account and the Cash account would be credited on the right side of the T-account

An income statement reports:

the revenues less the expenses incurred by a business

Choose the accounts below that would have a normal credit balance

unearned revenues revenues accounts payable common stock

On Mar 3, Lyons company received $100 cash in advance of providing catering services to a customer. Use your knowledge of what a correct journal entry should look like to identify what would be included in the correct journal entry.

-Cash would be debited and listed first -Unearned Revenue would be credited and listed second

Given the descriptions below, which is (are) true regarding notes receivable?

-Notes receivable is classified as an asset. -It is the promise of another entity to pay a specific sum of money on a specified future date. -Another name for a note receivable is a promissory note.

Which of the following statements is accurate about the land account?

-The Land account is an asset -The Land account would be increased on the left side of its T-account -The Land account is used to record the costs of land purchased by the business

You are entering a transaction in the journal. Place the following steps in the order that they would be entered in the journal

1 Enter date of transaction in date column 2 Enter name of account(s) debited and their amount(s) 3 Enter name of account(s) credited and their amount(s) 4 Enter explanation

Illustrate how the financial statements are linked by placing them in the correct order of preparation

1. Income statement 2. Statement of retained earnings 3. Balance sheet

Recall the required

1. Name of business 2. Name of financial statement 3. Period of time the financial statement covers

Which of the following statements is (are) correct regarding a T-account?

A T-account represents a ledger account A T-account may be used as a tool to visualize the effects of a transactions A T-account will show the debit and credit effects of transactions

Select the statements that are true regarding debiting and crediting

A debit or credit can increase or decrease an account, depending on the account A debit can increase an expense account For an account where a debit is an increase, the credit is a decrease A credit will always decrease an asset account

Which of the following statements is the correct definition of a liability?

A liability is a claim by a creditor against the assets of a business

The correct definition of an "account" includes which of the following?

A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item

Which of the following is the best definition of a source document in the accounting process?

A source document identifies and describes transactions and is the basis for the accounting information which is entered in an accounting system.

Which of the following statements is accurate regarding Accounts Payable?

Accounts payable refer to promises to pay later, which may arise from the purchase of supplies or services

Which of the following statements is (are) true about accounts receivables?

Accounts receivable increased when credit sales are made Accounts receivable reflects the amount of cash still owed by customers

Which of the following statements is (are) correct regarding the balance column in a ledger (or balance column account)?

An abnormal balance is identified by circling it, writing it in red or setting it in brackets Immediately after posting a transaction, the balance of the account is written in the balance column A zero balance for an account is usually shown by writing zeros or a dash in the balance column

The stockholders of a business received a $1000 dividend. how would this affect the total equity of the business?

Assets would be decreased and total equity would decrease as well

Which of the following financial statements reports the financial position of a business at a point in time?

Balance sheet

Which of the statements below is true regarding the statement of retained earnings?

Both the beginning and ending retained earnings balances are reported on the statement

Brown Company provided services to a customer and immediately collected $1900 cash. Show how to record the transaction to the T-accounts by completing the following sentence. Service revenue would be ____ on the _____ side of the T-account, and cash would be _____ on the _____ side of the T-account

Credited; Right; Debited; Left

Match the item on the left with the correct definition on the right

Creditors: Individuals or organizations that have rights to receive payments from a business Liabilities: Claims against the assets of a business Assets:Things of value owned by a business Expenses: The cost of doing business

Paul's Programming Services paid $100 dividends. Show how to record this transaction by selection the correct answers below.

Debit dividends; credit Cash

Since expenses are the costs of doing business and cause equity to _______, expenses are increased on the ______ side of their T-account

Decrease ; left

Which of the following statements about the dividends account is (are) correct?

Dividends are increased on the left side of the T-account Dividends is used to record distributions of assets to the owners of a business Dividends decrease Equity

On Mar 3, Lyons Company paid dividends of $1,000. Use your knowledge of what a correct journal entry should look like to identify what would be included.

Dividends would be debited and listed first, Cash would be credited and listed second

Which of the following would be included on a statement of retained earnings?

Dividends, Retained earnings at beginning of period, Retained earnings at end of period, Net Income (loss)

Describe where dollar signs are appropriate in financial statements?

Dollar signs are used besides every number in a column.

Smith company purchased $8000 of supplies on credit. Show how to record this transaction by selecting the correct answer below

Enter $8000 on left side of the Supplies account; enter $8000 on the right side of the Accounts Payable account

Which of the following statements is correct regarding the posting process?

Entries must be posted to the ledger before financial statements are prepared

Which of the following statements is (are) accurate regarding equipment purchased within a business?

Equipment purchases are reported on a balance sheet Equipment is an asset Equipment cost is initially recorded as an asset and as it is used and gets worn down, the cost is gradually expensed Equipment is reported on the left side of the accounting equation

Which of the following statements is the correct definition of equity?

Equity is the owner's claim on a company's assets

The business receives and immediately pays a $300 advertising bill. How would this payment affect the total equity of a business?

Expenses would be increase, so equity is decreased

An annual insurance policy is paid in advance by a company. How will the company treat this initial payment and the subsequent expiration of a portion of the policy over time?

Over time, the expired portion of the policy must be removed from the asset account as it has been used up and is no longer considered an asset. The initial payment will be recorded as an increase to a prepaid insurance account As a portion of the policy expires, the expired portion will be removed and transferred to an expense account

Lenten Company paid $1,200 for insurance coverage for the next year. Show how this transaction should be recorded by Lenten Company, by selecting the correct answer below.

Place $1,200 on the left side of the prepaid insurance account; place $1,200 on the right side of the cash account

Minor Games received a $500 payment for services to be provided in the future. Show how this transactions should be entered into T-accounts of Minor Games, by selecting the correct answer below.

Place $500 on the left side of the cash account; place $500 on the right side of the unearned revenue account

Which of the following lists of items contain only examples of prepaid (expense) accounts?

Prepaid rent, prepaid insurance

The accounting process serves which of the following purposes in business?

Records business transactions Identifies transactions and source documents Analyzes transactions

From the following lists of accounts, choose the list(s) which contains only expense accounts?

Rent expense, wages expense, insurance expense

Which of the following statements about revenue is correct?

Revenues cause equity to increase, and they are increased on the right side of the T-account.

The business earns $700 of consulting revenue. How would these earnings affect the total equity of a business?

Revenues increase, so total equity is increased

Which of the following would be considered a source document in an accounting system?

Sales ticket Purchase order Checks Employee time sheet

On Nov 1, Lyons Company pays $2,400 cash for supplies. Show how to record this transaction by selecting the correct answer below.

Supplies would be debited, and cash would be credited

Which of the following statements explains the difference between a Balance column account and a T-account?

T-accounts are a simple way to visualize t he effect of a transaction; however, Balance column accounts are used in actual accounting systems.

Which of the following statements best explains the post reference in a journal and a ledger?

The posting reference creates a link between the journal and the ledger

When entering transactions into account, the rules of double-entry accounting must be followed. These rules include:

The total amount debited must equal the total amount credited The accounting equation must remain in balance There must be at least one credit and one debit

Which of the following statements is (are) correct regarding the effects of debiting or crediting accounts?

To increase an expense account, you would debit it To decrease an asset, you would credit it To reduce cash, you would credit it To reduce accounts payable, you would debit it To increase the Dividends account, you would debit it

Recall that the balance sheet reports the equality of the accounting equation and would include which of the following amounts?

Total liabilities, Total Assets, and Retained earnings balance at end of period

The general ledger can be used to determine which of the following

Which accounts are being used by a company and their balances at any given time Common and unique accounts used by a business Increases and decreases in all accounts in a business

Holt Computer Services received $200 from a customer that it had billed earlier in the month. Illustrate how to record the transaction to the T-accounts by completing the following sentence. Accounts receivable would be ______( debited/ credited) on the ______(left/right) side of the T-account, and Cash would be ________( debited/ credited) on the _______ (left/right) side of the T-account.

credited; right; debited; left