Accounting Chapter 3 Flashcards
Account
An Individual accounting record of increases and decreases in specific asset, livability, stockholders’ equity, revenue or expense items.
Accounting Information System
The system of collecting and processing transaction data and communicating financial information to decision-makers.
Accounting Transactions
Events that require the financial statements because they affect assets, liabilities, or stockholders’ equity.
Chart of Accounts
A list of a company’s accounts
Credit
The right side of an account
Debit
The left side of an account
Double-entry system
A system that records the two-sided effect of each transaction in appropriate accounts.
General Journal
The most basic form of journal
General ledger
A ledger that contains all asset, liability, stockholders’ equity, revenue, and expense accounts.
Journalizing
The procedure of entering transaction data in the journal.
Journals
An accounting record in which transactions are initially recorded in chronological order.
Ledger
The group of accounts maintained by a company.
Posting
The procedure of transferring journal entry amounts to the ledger accounts.
T-Account
The basic form of an account
Trial Balance
A list of accounts and their balances at a given time.
An individual accounting record of increases and decreases in specific asset, liability, stockholders’ equity, revenue or expense items.
a. Account
b. Accounting Information System
c. Accounting Transactions
d. Ledger
a. Account.
The system of collecting and processing transaction data and communicating financial information to decision-makers.
a. Account
b. Accounting information system
c. Chart of accounts
d. Journalizing
b. Accounting information system
Events that require recording in the financial statements because they affect assets, liabilities, or stockholders’ equity.
a. Account
b. Accounting transactions
c. Debit
d. General journal
b. Accounting transactions
A list of a company’s accounts.
a. Account
b. Accounting transactions
c. Chart of accounts
d. Trial balance
c. Chart of accounts
The right side of an account.
a. Credit
b. Debit
c. Double-entry system
d. Ledger
a. Credit
The left side of an account.
a. Accounting transactions
b. Debit
c. Double-entry system
d. General journal
b. Debit
A system that records the two-sided effect of each transaction in appropriate accounts.
a. Credit
b. Double-entry system
c. Journalizing
d. Trial balance
b. Double-entry system
The most basic form of journal.
a. Accounting transactions
b. Chart of accounts
c. Debit
d. General journal
d. General journal
A ledger that contains all asset, liability, stockholders’ equity, revenue, and expense accounts.
a. Chart of accounts
b. Debit
c. General ledger
d. Trial balance
c. General ledger
The procedure of entering transaction data in the journal.
a. Journalizing
b. Journals
c. Posting
d. T-account
a. Journalizing
An accounting record in which transactions are initially recorded in chronological order.
a. Account
b. Debit
c. General journal
d. Journals
d. Journals
The group of accounts maintained by a company.
a. Debit
b. General ledger
c. Ledger
d. Posting
c. Ledger
The procedure of transferring journal entry amounts to the ledger accounts.
a. Chart of accounts
b. Debit
c. General journal
d. Posting
d. Posting
The basic form of an account.
a. Accounting information system
b. Credit
c. General ledger
d. T-account
d. T-account
A list of accounts and their balances at a given time.
a. Account
b. Accounting information system
c. Ledger
d. Trial balance
d. Trial balance
Expenses decrease retained earnings.
True
False
This statement is true. The costs that a firm incurs when operating its business cause retained earnings to decrease.
The effect on the basic accounting equation of performing services for cash are to
increase assets and decrease stockholders’ equity.
increase assets and increase stockholders’ equity.
increase assets and increase liabilities.
increase liabilities and increase stockholders’ equity.
increase assets and increase stockholders’ equity.
When services are performed for cash, assets are increased and stockholders’ equity is increased
Genesis Company buys equipment for $900 machine on credit. This transaction will immediately affect the
income statement only.
income statement and retained earnings statement only.
balance sheet only.
income statement, retained earnings statement, and balance sheet.
balance sheet only.
Which of the following events is not recorded in the accounting records?
The owner withdraws cash for personal use.
Equipment is purchased on account.
An employee is terminated.
A cash investment is made into the business.
An employee is terminated.
During 2014, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders’ equity
increased $40,000.
decreased $40,000.
decreased $140,000.
increased $140,000.
increased $40,000.
During 2014, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders’ equity
Retained earnings is decreased by
owner’s investments.
revenues.
expenses.
assets.
expenses
If an expense is paid with cash
assets will decrease.
retained earnings will increase.
liabilities will increase.
expenses will decrease.
assets will decrease.
If cash is received in advance from a customer
liabilities will increase.
stockholders’ equity will decrease.
retained earnings will increase.
assets will decrease.
liabilities will increase.
Receipt of an unearned revenue
increases an asset; increases a liability.
increases an asset; increases a revenue.
decreases a liability; increases stockholders’ equity.
decreases a revenue; increase stockholders’ equity.
increases an asset; increases a liability.
Payment of a dividend
decreases cash; increases stockholders’ equity.
decreases cash; decreases retained earnings.
increases retained earnings; increases expenses.
increases expenses; decreases cash.
decreases cash; decreases retained earnings.
If a company receives cash from a customer before performing services for the customer, then
assets increase and stockholders’ equity increases.
assets increase and liabilities increase.
assets increase and liabilities decrease.
assets decrease and liabilities increase.
assets increase and liabilities increase.
If total liabilities increase by $5,000 then
assets decrease by $5,000.
assets increase by $5,000, or stockholders’ equity decrease by $5,000.
stockholders’ equity increase by $5,000.
assets and stockholders’ equity each increase by $2,500.
assets increase by $5,000, or stockholders’ equity decrease by $5,000.
Every account has a left or credit side and a right or debit side.
True
False
False
The left side is the debit side while the right side is the credit side.
Every transaction affects at least two accounts.
True
False
True
There must be at least one debit, and one credit account.
An account is a part of the financial information system and is described by all except which one of the following?
An account has a title.
An account is a source document.
An account has a debit and credit side.
An account consists of three parts.
An account is a source document.
Which statement about an account is true?
There are separate accounts for specific assets and liabilities but only one account for stockholders’ equity items.
The right side of an account is the debit side.
An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders’ equity items.
In its simplest form, an account consists of two parts.
An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders’ equity items.
Assets are increased by credits.
True
False
False
Debits
decrease assets and increase liabilities.
increase both assets and liabilities.
decrease both assets and liabilities.
increase assets and decrease liabilities.
increase assets and decrease liabilities.
A revenue account
is decreased by credits.
has a normal balance of a debit.
is increased by credits.
is increased by debits.
is increased by credits.
Which accounts normally have debit balances?
Assets, liabilities, and dividends
Assets, expenses, and revenues
Assets, dividends, and expenses
Assets, expenses, and retained earnings
Assets, dividends, and expenses
What effects occur when an account payable is paid with cash?
Decreases stockholders’ equity and decreases liabilities
Decreases assets and increases stockholders’ equity
Increases assets and decreases liabilities
Decreases assets and decreases liabilities
Decreases assets and decreases liabilities
Accounts with normal debit balances include
liabilities and expenses.
expenses and assets.
assets and liabilities.
stockholders’ equity and revenues.
expenses and assets.
Accounts with normal credit balances include
revenues and expenses.
revenues and assets.
assets and liabilities.
liabilities and stockholders’ equity.
liabilities and stockholders’ equity.
An account has $300 on the debit side and $900 on the credit side. How much is the account balance?
Credit of $900
Credit of $600
Debit of $600
Debit of $1,200
Credit of $600
When credits are greater than debits, credits minus debits results in a credit balance of $600. The debit of $300 is subtracted from the credit of $900, which results in a credit of $600.
At September 1, 2014, Five-O Inc. reported retained earnings of $136,000. During the month, Five-O generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the balance in retained earnings at September 30, 2014?
$136,000 debit
$142,000 credit
$8,000 credit
$137,000 credit
$142,000 credit
Which of the following is the correct sequence of events?
Analyze a transaction; post it to the ledger; record it in the journal
Analyze a transaction; record it in the journal; post it to the ledger
None of the answer choices provides the correct sequence
Record a transaction in the journal; analyze the transaction; post it to the ledger
Analyze a transaction; record it in the journal; post it to the ledger
What is evidence that a transaction has occurred?
Anyone of the answer choices can be considered evidence
Journal
Source document
Ledger
Source document
Which is not part of the recording process?
Posting transactions
Entering transactions in a journal
Analyzing transactions
Preparing a trial balance
Preparing a trial balance
Transactions are recorded in chronological order in the journal.
True
False
True
Which of these statements about a journal is false?
It helps to locate errors because the debit and credit amounts for each entry can be readily compared.
It contains only revenue and expense accounts.
It discloses the complete effect of a transaction in one place.
It provides a chronological record of transactions.
It contains only revenue and expense accounts.
Which of the following is not a part of a complete journal entry?
A brief explanation of the transaction
The balance of each account affected by the transaction
The date of the transaction
The accounts and amounts to be debited and credited
The balance of each account affected by the transaction
Where is the first place every transaction is recorded?
In the ledger
In the basic accounting equation
In the journal
In the respective accounts
In the journal
What journal entry is recorded as a result of issuing stock to investors for cash?
A debit to Cash and a credit to Common Stock
A debit to Common Stock and a credit to Cash
A debit to Cash and a credit to Retained Earnings
A credit to Cash and a debit to Retained Earnings
A debit to Cash and a credit to Common Stock
A complete journal entry does not show
the date of the transaction.
the accounts and amounts to be debited and credited.
the new balance in the accounts affected by the transaction.
a brief explanation of the transaction.
the new balance in the accounts affected by the transaction.
Transactions are initially recorded in chronological order in a __________ before they are transferred to the accounts.
register
ledger
T account
journal
journal
The entire group of accounts maintained by a company is referred to collectively as the journal.
True
False
False
The entire group of accounts maintained by a company is referred to collectively as the ledger.
What does a general ledger of a company contain?
Asset and liability accounts only
Asset and stockholders’ equity accounts only
All the asset, liability, stockholders’ equity, revenue, and expense accounts
Revenue and expense accounts only
All the asset, liability, stockholders’ equity, revenue, and expense accounts
What type of account is unearned revenue?
Expense
Liability
Revenue
Asset
Liability
What is the appropriate order for a company’s chart of accounts?
Assets, liabilities, stockholders’ equity, expenses, revenue
Assets, liabilities, stockholders’ equity, revenues, expenses
Assets, liabilities, revenues, expenses, stockholders’ equity
Assets, revenues, expenses, liabilities, stockholders’ equity
Assets, liabilities, stockholders’ equity, revenues, expenses
Posting
is an optional step in the recording process.
normally occurs before journalizing.
transfers journal entries to ledger accounts.
transfers ledger transaction data to the journal.
transfers journal entries to ledger accounts.
If an account is debited in the journal entry, then
that account will be both debited and credited in the ledger.
that account will be credited in the ledger.
that account will be debited in the ledger.
The transactions will not balance.
that account will be debited in the ledger.
Which of the following is the correct sequence of events?
Journalize; post; prepare a trial balance
Post; journalize; prepare a trial balance
Prepare a trial balance; post; journalize
Prepare a trial balance; journalize; post
Journalize; post; prepare a trial balance
If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates
that all accounts reflect correct balances. no errors can be discovered. the mathematical equality of the accounting equation. no errors have been made.
the mathematical equality of the accounting equation.
When a trial balance balances, it is an indication that
debits equal credits.
all transactions have been journalized.
all journal entries have been posted.
the account balances are correct.
debits equal credits.
Accounts are listed on the trial balance in
alphabetical order.
the order that they appear in the ledger.
the order in which they are posted.
chronological order.
the order that they appear in the ledger.
A trial balance
proves that all transactions have been recorded.
will not balance if a correct journal entry is posted twice.
is a list of accounts with their balances at a given time.
proves the mathematical accuracy of journalized transactions.
is a list of accounts with their balances at a given time.
A trial balance will not balance if
a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.
a correct journal entry is posted twice.
the purchase of supplies on account is debited to Supplies and credited to Cash.
a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100.
a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100.
Issuance of stock is an investing activity.
True
False
False.
This statement is false. Issuance of stock is a financing activity.
On. Jan. 10, Novis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this?
Investing activity
Accrual activity
Operating activity
Financing activity
Investing activity
In what section of the statement of cash flows would the purchase of office equipment for $10,000 appear?
Investing activities
In the notes to the statement of cash flows
Financing activities
Operating activities
Investing activities
Which of the following is not one of the primary types of the financing activities in the statement of cash flows?
Issuing shares of stock
Borrowing money
Paying dividends
Buying equipment
Buying equipment
