Smartbook: Chapter 2 Analyzing and Recording Transactions

Choose the statement below that correctly explains a general journal.

A journal is a complete record of each transaction in one place and includes the debit and credit of each transaction.

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.

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 entering an event into the accounting system.

Which of the following statements explains what a trial balance is?

A trial balance confirms that the sum of debit account balances equals the sum of credit account balances.

Which of the following accounts would be considered an asset? (Check all that apply.)

Accounts Receivable Cash Building Supplies

L. Lyons started a business and invested $4,000. Illustrate how to record the transaction in the T-accounts by completing the following sentence. The Cash account would be ___ (debited/credited) on the ___ (left/right) side of the T-account and the Owner, Capital account would be ___ (debited/credited) on the ___(left/right) side of the T-account.

Debited; Left; Credited; Right

An account is a record of increases and ___ in a specific asset, liability, equity, revenue or expense.

Descreases

True or false: Assets are claims (by creditors) against the company.

False (Rationale: Assets are resources owned or controlled by the business.)

Which of the following statements correctly explains how to prepare a trial balance? (Check all that apply.)

If an account has a zero balance, it may be omitted entirely. List each account title and its amount from the ledger. Verify that the total debit balances equals the total credit balances. Compute the total of debit balances and the total of credit balances.

Which statement is correct regarding entering transactions into the accounting equation?

If the total of the right side of the accounting equation increased, then the total of the left side of the accounting equation must also increase.

Which of the following statements is (are) correct regarding a journal? (Check all that apply.)

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

After entering a transaction into the accounting equation, an increase in total assets can be accompanied by a(n) (increase/decrease) ___ in total liabilities and (equity/assets) ___.

Increase; equity

An income statement reports:

the revenues less the expenses incurred by a business

Identify which of the following lists include only examples of assets.

Building, cash, accounts receivable

J. Jackson invested $1,000 in his business. Show how to use T-accounts to record this transaction by selecting the correct answer below.

Debit Cash; credit Owner, Capital.

When preparing a trial balance, there are certain steps that need to be followed. Place the following steps in the correct order.

1 List each account title and its amount from the general ledger. 2 Compute the total of debit balances and the total of credit balances. 3 Verify that total debit balances equal total credit balances.

Which of the following statements is (are) correct regarding a T-account? (Check all that apply.)

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

Which statement best describes a T-account?

A T-account represents a ledger account and is a tool used to understand the effects of one or more transactions.

Review each of the following statements to determine which is correct regarding the importance of assessing a company's risk of paying debt. (Check all that apply.)

A company that finances their assets by borrowing will need to make enough money to pay off the debt. A company's required debt payments may be greater than its ability to generate money to make those payments. If a company has a lot of debt, they may not be able to afford to take on new debt.

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

A general ledger: It is a collection of all accounts with their activity and balances 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 statements is the best definition of an asset?

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

Which of the following statements is the best definition of the 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.

A trial balance is a(n) (list/balance/chart) ___ of accounts and their balances at a point in time and is used to confirm that the sum of debit account balances equals the sum of ___ account balances. Use one word for each blank.

List; credit

Which of the following would be considered a source document in an accounting system? (Check all that apply.)

Purchase order Checks Sales receipt Payroll records

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.

The business earns $2,800 cash for services performed. How would this receipt affect the total equity of a business?

Revenues would be increased, so equity is increased.

Which of the following best and fully describes a general ledger?

The general ledger is a record containing all accounts used by a company.

Identify which of the following formulas correctly defines how to calculate the debt ratio.

Total liabilities/Total assets

Which of the following would be included on an income statement? (Check all that apply.)

Total revenues Total expenses Net Income

The general ledger can be used to determine which of the following (select all answers which apply):

increases and decreases in all accounts in a business. which accounts are being used by a company and their balances at any given time. common and unique accounts used by a business.