CHAPTER 2

Question 1

What accounts belong under assets?

Answer 1

Cash
Accounts receivable
Inventory
Prepaid expenses
Land
Buildings
Equipment, furniture, fixtures

Question 2

What is an asset?

Answer 2

A resource that provides a future benefit for a business

Question 3

What accounts belong under liabilities?

Answer 3

Accounts payable
Accrued liabilities
Loans payable

Question 4

What is an Accrued liability?

Answer 4

An expense not yet paid for

Question 5

What are loans payable?

Answer 5

Owing borrowed money

Question 6

What accounts belong under Shareholders Equity?

Answer 6

Share capital / Common shares
Retained earnings
Dividends
Revenues
Expenses

Question 7

What are dividends?

Answer 7

Payments to shareholders that decrease retained earnings

Question 8

What does the income statement report?

Answer 8

Revenues, Expenses and Income

Question 9

What does the balance sheet list?

Answer 9

Assets, Liabilities and Shareholders equity at the end of a period

Question 10

What is the Chart of accounts?

Answer 10

A list of the names of accounts with their unique account numbers

Question 11

If an accountant is unsure which account to use, what should they do?

Answer 11

Consult the Chart of Accounts

Question 12

In T-accounts, what is held on the right?

Answer 12

Credit

Question 13

In T-accounts, what is held on the left?

Answer 13

Debit

Question 14

What is a Double-Entry system?

Answer 14

A system that records transactions on credit and debit.

Question 15

What does Shareholders Equity equal?

Answer 15

Share capital
+Opening retained earnings
-Dividends
+(revenues-expenses)

Question 16

What do you use when recording an increase in Assets?

Answer 16

Debit

Question 17

What do you use when recording a decrease in Assets?

Answer 17

Credit

Question 18

What do you use when recording an increase in Liabilities or Shareholders Equity?

Answer 18

Credit

Question 19

What do you use when recording a decrease in Liabilities or Shareholders Equity?

Answer 19

Debit

Question 20

When making journal entries, what are the steps?

Answer 20

Which accounts were affected by the transaction
Are they increasing or decreasing? (Debit or Credit)
Record transaction in journal

Question 21

What is Posting?

Answer 21

Transfer of information from the Journal to the Ledger

Question 22

What does a trial balance list?

Answer 22

All of a business’s ledger accounts and balances

Question 23

In what order are the Trial Balances components listed?

Answer 23

Asset accounts
Liability accounts
Accounts that affect Shareholders equity