Accounting Chapter 2

Question 1

Functions of financial accounting

Answer 1

1. Measure Buisness activities of the company
   Record transaction
2. Communicate measurements to external parties for decision making
   Prepare financial statements

Question 2

Account record of all transactions in accounts
1.assets account examples
2. Liability accounts examples
3. Stockholder equity accounts examples

Answer 2

1. Cash, supplies, and equipment
2. Accounts payable, salaries payable, utilities payable , and taxes payable
3. Common stock and retained earnings

Question 3

What would be the effect on total assets if a company purchased land for $200,000 cash?

A. Total assets would go up by $200,000
B. Total assets would go down by $200,000
C. There would be zero effect on total assets

Answer 3

C.
BECAUSE one asset (land) would go up and another asset (cash) would go down. There would be zero effect on total assets

Question 4

What effect does the payment of dividends have on the accounting equation
A. Assets decrease and equity increases
B. Asssets decrease and equity decreases
C. Assets decrease and liability’s increase
D. Assets increase and equity increase

Answer 4

B. Assets decrease and equity decrease

Question 5

Assets increase with ,…..

Answer 5

Debits

Question 6

Liabilities and stockholders equity increases with….

Answer 6

Credits

Question 7

The retained earnings accounts is a stockholders equity account that ….

Answer 7

Normally has a credit balance

Question 8

THE retained earnings account has three components which are what

Answer 8

Revenues , expenses , and dividends

Question 9

The difference between revenues …… and expenses …… equals what ……

Answer 9

1. Increased by credits
   2.increased by debits
2. Net income

Question 10

What does the word debit mean?

A. Left side
B. Right side
C. Increase
D. Decrease

Answer 10

A. Left side

Question 11

KEY POINT
For each transaction total debits must equal total credits

Question 12

Posting is the process of what

Answer 12

The process of transferring the debit and credit information from the journal to individual general ledger accounts

Question 13

The general ledger provides…

Answer 13

In a single collection each account with its individual transaction and resulting account balance

Question 14

Left side T- account is …

Right side is the….

Answer 14

1. Debit
2. Credit column

Question 15

Which of the following is used to provide a chronological record of all transactions affecting a firm?
A. A general ledger
B. The journal
C. The trial balance
D. The income statement

Answer 15

B THE JOURNAL

Explanation; the journal is a chronological record of the economic events that have taken place.

Question 16

Which of the following accounts would be debited when a company pays 12,000$ in advanced for one year of rent.

A. Cash
B. Rent expense
C. Prepaid rent
D. Rental income

Answer 16

C. Prepaid rent

Explanation; this transaction creates a prepaid account- specifically prepaid rent. Prepaid rent is an asset account.in order to increase an asset account you would debit it. The correct answer is the prepaid rent account would be debited for 12,000 when the rent was paid In advance.

Question 17

A trial balance is ….

Answer 17

A list of all accounts and their balance at a particular dare