Chapter 2

Question 1

What is a transaction?

Answer 1

Any event that has a financial impact on a business and can be measured reliably.

Question 2

A(n) __________ is the record of all the changes in a specific asset, liability, or stockholders’ equity during a period.

Answer 2

Account

Question 3

What type of account is cash?

Answer 3

Asset Account

Question 4

What type of account is prepaid expenses?

Answer 4

Asset Account

Question 5

What type of account is accounts receivable?

Answer 5

Asset Account

Question 6

What type of account is notes receivable?

Answer 6

Asset Account

Question 7

What type of account is PP&E?

Answer 7

Asset Account

Question 8

What type of account is accounts payable?

Answer 8

Liability Account

Question 9

What type of account is notes payable?

Answer 9

Liability Account

Question 10

What type of account is common stock?

Answer 10

Stockholders’ Equity Account

Question 11

What type of account is Retained Earnings?

Answer 11

Stockholders’ Equity Account

Question 12

What type of account is Revenues?

Answer 12

Stockholders’ Equity Account

Question 13

What type of account is Expenses?

Answer 13

Stockholders’ Equity Account

Question 14

What type of account is Dividends?

Answer 14

Stockholders’ Equity Account

Question 15

What is the rules of Debits and Credits?

Answer 15

Debit means left side, Credit means right side of T-Account

Question 16

Assets are ________ by debiting and ________ by crediting.

Answer 16

increased, decreased

Question 17

Liabilities are ________ by debiting and ________ by crediting.

Answer 17

decreased, increased

Question 18

Common stock is ________ by debiting and ________ by crediting.

Answer 18

decreased, increased

Question 19

Retained earnings are ________ by debiting and ________ by crediting.

Answer 19

decreased, increased

Question 20

Revenues are ________ by debiting and ________ by crediting.

Answer 20

decreased, increased

Question 21

Expenses are ________ by debiting and ________ by crediting.

Answer 21

increased, decreased

Question 22

Dividends are ________ by debiting and ________ by crediting.

Answer 22

increased, decreased

Question 23

When you purchase supplies on credit, you debit ______ and credit _______.

Answer 23

Debit supplies, credit accounts payable

Question 24

The business sold Tony Stark $15,000 of Common Stock for cash. How is this recorded?

Answer 24

Dr. Cash 15,000

Cr. Common Stock 15,000

Question 25

Steve Rogers purchase equipment for $3,000. How is this recorded?

Answer 25

Dr. Equipment 3,000 | Cr. Cash 3,000

Question 26

Avengers Inc. borrows $10,000 from the bank and signs a two-year note payable to the bank. How is this recorded?

Answer 26

Dr. Cash 10,000 | Cr. Notes Payable 10,000

Question 27

Avengers Inc. provides services for clients. Avengers Inc. collects $1,250 cash for services provided. How is this recorded?

Answer 27

Dr. Cash 1,250 | Cr. Service Revenue 1,250

Question 28

Bruce Banner works for Avengers Inc. Bruce Banner performs $4,200 of services, and in return, receives the clients promise to pay this within one month. How is this recorded?

Answer 28

Dr. Accounts Receivable 4,200 | Cr. Service Revenue 4,200

Question 29

Avengers Inc. pays $1,000 to the bank for its notes payable. How is this recorded?

Answer 29

Dr. Notes Payable 1,000 | Cr. Cash 1,000

Question 30

Avengers Inc. pays $2,000 in Rent for Avengers Tower monthly. The company pays rent for the month of September. How is this recorded?

Answer 30

Dr. Rent Expense 2,000 | Cr. Cash 2,000

Question 31

Avengers Inc. pays $1,300 of Cash Dividends to Tony Stark, the stockholder. How is this recorded?

Answer 31

Dr. Dividends 1,300 | Cr. Cash 1,300

Question 32

True or False. Debit means increase.

Answer 32

False. Debit simply means LEFT in accounting terms. Increases/decreases can happen by means of debiting or crediting.

Question 33

True or False. Credit does not mean decrease.

Answer 33

True. Credit simply means RIGHT in accounting terms. Increases/decreases can happen by means of debiting or crediting.

Question 34

___________ _____________ is the balance that appears on the side of an account where increases are recorded.

Answer 34

Normal balance

Question 35

What does a Trial Balance do?

Answer 35

Summarizes all the account balances helping to prove that all debit balances equal total credit balances.

Question 36

True or False. A Trial Balance is a financial statement.

Answer 36

False. A Trial Balance is NOT a financial statement.