question

an individual accounting record of increases and decreases in specific asset, liability, stockholder's equity, revenue or expense items

answer

account

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the system of collecting and processing transaction data and communicating financial information to decision makers

answer

accounting information system

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events that require recording in the financial statements because they affect assets, liabilities, or stockholder's equity

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accounting transactions

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a list of a company's accounts

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chart of accounts

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the right side of an account

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credit

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the left side of an account

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debit

question

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

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double-entry system

question

the most basic form of journal

answer

general journal

question

a ledger that contains all asset, liability, stockholder's equity, revenue, and expense accounts

answer

general ledger

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the procedure of entering transaction data in the journal

answer

journalizing

question

an accounting record in which transactions are initially recorded in chronological order

answer

journal

question

contains the entire group of accounts maintained by a company

answer

ledger

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the procedure of transferring journal entry amounts to the ledger accounts

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posting

question

the basic form of an account

answer

T account

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a list of accounts and their balances at a given time

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trial balance

question

analyze the effect of business transactions on the basic accounting equation

answer

Each business transaction must have a dual effect on the accounting equation. For example, if an individual asset is increased, there must be a corresponding (a) decrease in another asset (b) increase in a specific liability (c) increase in stockholders' equity.

question

Explain what an account is and how it helps in the recording process.

answer

An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items.

question

Define debits and credits and explain how they are used to record business transactions.

answer

The terms debit and credit are synonymous with left and right. Assets, dividends, and expenses are increased by debits and decreased by credits. Liabilities, common stock, retained earnings, and revenues are increased by credits and decreased by debits.

question

Identify the basic steps in the recording process.

answer

The basic steps in the recording process are: (a) analyze each transaction in terms of its effect on the accounts (b) enter the transaction information in a journal (c) transfer the journal information to the appropriate accounts in the ledger.

question

Explain what a journal is and how it helps in the recording process.

answer

The initial accounting record of a transaction is entered in a journal before the data are entered in the accounts. A journal (a) discloses in one place the complete effect of a transaction, (b) provides a chronological record of transactions, and (c) prevents or locates errors because the debit and credit amounts for each entry can be readily compared.

question

Explain what a ledger is and how it helps in the recording process.

answer

The entire group of accounts maintained by a company is referred to collectively as a ledger. The ledger keeps in one place all the information about changes in specific account balances.

question

Explain what posting is and how it helps in the recording process.

answer

Posting is the procedure of transferring journal entries to the ledger accounts. This phase of the recording process accumulates the effects of journalized transactions in the individual accounts.

question

Explain the purposes of a trial balance.

answer

A trial balance is a list of accounts and their balances at a given time. The primary purpose of the trial balance is to prove the mathematical equality of debits and credits after posting. A trial balance also uncovers errors in journalizing and posting and is useful in preparing financial statements.

question

Classify cash activities as operating, investing, or financing.

answer

Operating activities are the types of activities the company uses to generate profits. Investing activities relate to the purchase or sale of long-lived assets used in operating the business, or to the purchase or sale of investment securities (stock and bonds of other companies). Financing activities are borrowing money, issuing shares of stock, and paying dividends.

question

The effects on the basic accounting equation of performing services for cash are to: A. increase assets and decrease stockholders' equity. B. increase assets and increase stockholders' equity. C. increase assets and increase liabilities. D. increase liabilities and increase stockholders' equity.

answer

B. increase assets and increase stockholders' equity.

question

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

answer

B. balance sheet only.

question

Which of the following events is not recorded in the accounting records? A. Equipment is purchased on account. B. An employee is terminated. C. A cash investment is made into the business. D. Company pays dividend to stockholders.

answer

B. An employee is terminated.

question

During 2012, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity therefore: A. increased $40,000. B. decreased $140,000. C. decreased $40,000. D. increased $140,000.

answer

A. increased $40,000.

question

Which statement about an account is true? A. In its simplest form, an account consists of two parts. B. An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items. C. There are separate accounts for specific assets and liabilities but only one account for stockholders' equity items. D. The left side of an account is the credit or decrease side.

answer

B. An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items.

question

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

answer

C. increase assets and decrease liabilities.

question

A revenue account: A. is increased by debits. B. is decreased by credits. C. has a normal balance of a debit. D. is increased by credits.

answer

D. is increased by credits.

question

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

answer

D. Assets, dividends, and expenses.

question

Paying an account payable with cash affects the components of the accounting equation in the following way: A. Decreases stockholders' equity and decreases liabilities. B. Increases assets and decreases liabilities. C. Decreases assets and increases stockholders' equity. D. Decreases assets and decreases liabilities.

answer

D. Decreases assets and decreases liabilities.

question

Which is not part of the recording process? A. Analyzing transactions. B. Preparing a trial balance. C. Entering transactions in a journal. D. Posting transactions.

answer

B. Preparing a trial balance.

question

Which of these statements about a journal is false? A. It contains only revenue and expense accounts. B. It provides a chronological record of transactions. C. It helps to locate errors because the debit and credit amounts for each entry can be readily compared. D. It discloses in one place the complete effect of a transaction.

answer

A. It contains only revenue and expense accounts.

question

A ledger: A. contains only asset and liability accounts. B. should show accounts in alphabetical order. C. is a collection of the entire group of accounts maintained by a company. D. provides a chronological record of transactions.

answer

C. is a collection of the entire group of accounts maintained by a company.

question

Posting: A. normally occurs before journalizing. B. transfers ledger transaction data to the journal. C. is an optional step in the recording process. D. transfers journal entries to ledger accounts.

answer

D. transfers journal entries to ledger accounts.

question

A trial balance: A. is a list of accounts with their balances at a given time. B. proves that proper account titles were used. C. will not balance if a correct journal entry is posted twice. D. proves that all transactions have been recorded.

answer

A. is a list of accounts with their balances at a given time.

question

A trial balance will not balance if: A. a correct journal entry is posted twice. B. the purchase of supplies on account is debited to Supplies and credited to Cash. C. a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100. D. a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.

answer

C. a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100.

question

If services are rendered on account, then A. liabilities will decrease. B. assets will decrease. C. stockholders' equity will increase. D. liabilities will increase.

answer

C. stockholders' equity will increase.

question

If expenses are paid in cash, then A. stockholders' equity will increase. B. assets will decrease. C. assets will increase. D. liabilities will decrease.

answer

B. assets will decrease.

question

When collection is made on Accounts Receivable, A. total assets will remain the same. B. total assets will decrease. C. stockholders equity will increase. D. total assets will increase.

answer

A. total assets will remain the same.

question

Comstock Company provided consulting services and billed the client $2,500. As a result of this event a. assets remained unchanged. b. assets increased by $2,500. c. equity increased by $2,500 d. Both b and c.

answer

d. Both b and c.

question

In recording an accounting transaction in a double-entry system A. the number of debit accounts must equal the number of credit accounts. B. there must only be two accounts affected by any transaction. C. there must always be entries made on both sides of the accounting equation. D. the amount of the debits must equal the amount of the credits.

answer

D. the amount of the debits must equal the amount of the credits.

question

Which of the following accounts is increased with a debit? A. Dividends B. Service Revenue C. Interest payable D. Common Stock

answer

A. Dividends

question

When a company performs a service but has not yet received payment, it A. debits Accounts Receivable and credits Service Revenue. B. makes no entry until cash is received. C. debits Service Revenue and credits Accounts Receivable. D. debits Service Revenue and credits Accounts Payable.

answer

A. debits Accounts Receivable and credits Service Revenue.

question

A credit to a liability account A. indicates an increase in the amount owed to creditors. B. indicates a decrease in the amount owed to creditors. C. is an error. D. must be accompanied by a debit to an asset account.

answer

A. indicates an increase in the amount owed to creditors.

question

Which of the following accounts has a normal credit balance? A. Prepaid Rent B. Notes Receivable C. Rent Revenue D. Rent Expense

answer

C. Rent Revenue

question

Assets: A. increase debit and decrease credit B. increase debit and increase credit C. decrease debit and increase credit D. decrease debit and decrease credit

answer

A. increase debit and decrease credit

question

Liabilities A. increase debit and decrease credit B. increase debit and increase credit C. decrease debit and increase credit D. decrease debit and decrease credit

answer

C. decrease debit and increase credit

question

Common Stock A. increase debit and decrease credit B. increase debit and increase credit C. decrease debit and increase credit D. decrease debit and decrease credit

answer

C. decrease debit and increase credit

question

Retained Earnings A. increase debit and decrease credit B. increase debit and increase credit C. decrease debit and increase credit D. decrease debit and decrease credit

answer

C. decrease debit and increase credit

question

Dividends A. increase debit and decrease credit B. increase debit and increase credit C. decrease debit and increase credit D. decrease debit and decrease credit

answer

A. increase debit and decrease credit

question

Revenues A. increase debit and decrease credit B. increase debit and increase credit C. decrease debit and increase credit D. decrease debit and decrease credit

answer

C. decrease debit and increase credit

question

Expenses A. increase debit and decrease credit B. increase debit and increase credit C. decrease debit and increase credit D. decrease debit and decrease credit

answer

A. increase debit and decrease credit

question

The journal makes three significant contributions to the recording process:

answer

1. it discloses in one place the complete effect of a transaction 2. it provides a chronological record of transactions 3. it helps to prevent or locate errors because the debit and credit amounts for each entry can be readily compared

question

the effect on the basic accounting equation of performing services for cash are: A. increase assets and increase liabilities B. increase liabilities and increase stockholder's equity C. increase assets and increase stockholder's equity D. increase assets and decrease stockholder's equity

answer

C. increase assets and increase stockholder's equity

question

an account is a part of the financial information system and is described by all EXCEPT which one of the following: A. an account has a debt and credit side B. an account consists of three parts C. an account is a source document D. an account has a title

answer

C. an account is a source document

question

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 edger C. record a transaction in the journal; analyze the transaction; post it to the ledger D. none of the above it the correct sequence

answer

B. analyze a transaction; record it in the journal; post it to the edger

question

Which of these statements about a journal is false? A. It discloses the complete effect of a transaction in one place. B. It provides a chronological record of transactions. C. It helps to locate errors because the debit and credit amounts for each entry can be readily compared. D. It contains only revenue and expense accounts.

answer

D. It contains only revenue and expense accounts.

question

What does a general ledger of a company contain? A. Revenue and expense accounts B. Asset and liability accounts C. All the asset, liability, and stockholders' equity accounts D. All the asset, liability, stockholders' equity, revenue, and expense accounts

answer

D. All the asset, liability, stockholders' equity, revenue, and expense accounts

question

Which of the following is the correct sequence of events? A. Journalize; post; prepare a trial balance B. Post; journalize; prepare a trial balance C. Prepare a trial balance; post; journalize D. Prepare a trial balance; journalize; post

answer

A. Journalize; post; prepare a trial balance

question

issuance of stock is an investing activity. True or False?

answer

false

question

On. Jan. 10, Novis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this? A. Operating activity B. Financing activity C. Investing activity D. Accrual activity

answer

C. Investing activity

question

most businesses use _______________ systems

answer

computerized accounting (EDP) systems

question

______ are economic events that require recording in the financial statements

answer

transactions

question

the process of identifying the specific effects of economic events on the accounting equation

answer

analyzing transactions

question

left

answer

debit

question

right

answer

credit

question

double entry system:

answer

- each transaction must affect two or more accounts to keep the basic accounting equation in balance - recording done by debiting at least one account and crediting another - debits must equal credits

question

if debits are greater than credits, the account will have a ________ balance

answer

debit

question

if credits are greater than debits, the account will have a _______ balance

answer

credit

question

the normal balance is on the _____ side

answer

increase

question

_______ & _______ increase stockholders' equity (credit)

answer

owner's investments & revenues

question

the purpose of earning revenues is to:

answer

benefit the stockholders

question

the effect of debits and credits on revenue accounts is the ________ their effect on stockholders' equity

answer

same as

question

expenses ____ stockholders' equity

answer

decrease

question

_______ & _______ decrease stockholders' equity

answer

dividends & expenses

question

which accounts have a normal balance debit?

answer

- assets - expenses - dividends

question

which accounts have a normal balance credit?

answer

- liabilities - stockholders' equity - revenue

question

for every debit there must be a _______

answer

credit

question

________, such as a sales slip, a check, a bill, or a cash register tape, provide evidence of the transaction

answer

source documents

question

the journal:

answer

- book of original entry - transactions recorded in chronological order

question

the journals contributions to the recording process:

answer

1. discloses the complete effects of a transaction 2. provides a chronological record of transactions 3. helps to prevent or locate errors because the debit and credit amounts can be easily compared

question

what are the steps to follow in the recording process?

answer

1. determine what type of account is involved 2. determine what items increased or decreased and by how much 3. translate the increases and decreases into debits and credits

question

the purpose of a trial balance is:

answer

to prove that debits equal credits

question

the trial balance may balance evenly when:

answer

1. a transaction is not journalized 2. a correct journal entry is not posted 3. a journal entry is posted twice 4. incorrect amounts are used in journalizing or posting, OR 5. offsetting errors are made in recording the amount of the transaction

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