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Principles of Accounting - Financial > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

What are transactions conducted with a separate economic entity?

A

External Transactions

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2
Q

What is the summary of all transactions related to a particular item over a period of time called?

A

An Account

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3
Q

What’s another name for deferred revenue?

A

Unearned revenue

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4
Q

What is the equation to find Stockholders’ Equity?

A

Common Stock + Retained Earnings

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5
Q

Fill in the Blank: Increase or Decrease

Assets ______ with debit and _______ with credit

A

Assets increase with debit and decrease with credit

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6
Q

Fill in the Blank: Increase or Decrease

Liabilities _______with debit and _______ with credit

A

Liabilities decrease with debit and increase with credit

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7
Q

Fill in the Blank: Increase or Decrease

Stockholders’ Equity _______ with debit and _______ with credit

A

Stockholders’ Equity decreases with debit and increases with credit

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8
Q

Fill in the Blank: Increase or Decrease

Common Stock _______ with debit and _______ with credit

A

Common Stock decreases with debit and increases with credit

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9
Q

Fill in the Blank: Increase or Decrease

Retained Earnings _______ with debit and _______ with credit

A

Retained Earnings decrease with debit and increase with credit

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10
Q

Fill in the Blank: Increase or Decrease

Revenues _______ with debit and _______ with credit

A

Revenues decrease with debit and increase with credit

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11
Q

Fill in the Blank: Increase or Decrease

Expenses _______ with debit and _______ with credit

A

Expenses increase with debit and decrease with credit

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12
Q

Fill in the Blank: Increase or Decrease

Dividends ________ with debit and _______ with credit

A

Dividends increase with debit and decrease with credit

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13
Q

What’s the trick to remember which accounts decrease or increase with debit or credit?

A

D L
E O
A R

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14
Q

What does it mean when something in “on account?”

A

It means that we haven’t paid it yet

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15
Q

Do you do journal entries before or after you do the financial statements?

A

Before

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16
Q

Make the journal entry:

Sell shares of common stock for $25,000 to obtain the funds necessary to start the business.

A

12/1 Cash $25,000

Common Stock $25,000

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17
Q

Make the journal entry:

Borrow $10,000 from the local bank and sign a note promising to repay the full amount of the debt in three years.

A

12/1 Cash $10,000

Notes Payable $10,000

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18
Q

Make the journal entry:

Purchase equipment necessary for giving golf training, $24,000 cash.

A

12/1 Equipment $24,000

Cash $24,000

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19
Q

Make the journal entry:

Pay one year of rent in advance, $6,000 ($500 per month).

A

12/1 Prepaid Rent $6,000

Cash $6,000

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20
Q

Make the journal entry:

Purchase supplies on account, $2,300.

A

12/6 Supplies $2,300

Accounts Payable $2,300

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21
Q

Make the journal entry:

Provide golf training to customers for cash, $4,300.

A

12/12 Cash $4,300

Service Revenue $4,300

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22
Q

Make the journal entry:

Provide golf training to customers on account, $2,000.

A

12/17 Accounts Receivable $2,000

Service Revenue $2,000

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23
Q

Make the journal entry:

Receive cash in advance for 12 golf training sessions to be given in the future, $600.

A

12/23 Cash $600

Deferred Revenue $600

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24
Q

Make the journal entry:

Pay salaries to employees, $2,800.

A

12/28 Salaries Expense $2,800

Cash $2,800

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25
Q

Make the journal entry:

Pay cash dividends of $200 to shareholders.

A

12/30 Dividends $200

Cash $200

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26
Q

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
d. None of the above

A

c. There would be zero effect on total assets

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27
Q

True or False:

After each transaction, the accounting equation must always remain in balance

A

True

28
Q

Fill in the Bank: Increase or Decrease

Dividends _______ retained earnings

A

Decrease

29
Q

Fill in the Bank: Increase or Decrease

Expenses _______ retained earnings

A

Decrease

30
Q

Fill in the Bank: Increase or Decrease

Revenues _______ retained earnings

A

Increase

31
Q

What indicates that the company has yet to provide services even though it has collected the customer’s cash?

A

Deferred Revenue

32
Q

What account does prepaid rent fall under?

A

Assets

33
Q

When doing a trial balance what are the key words that you should look for if it is deferred revenue?

A

In advance

34
Q

When doing a trail balance what are the key words that you should look for if it is accounts payable?

A

Purchase and on account

35
Q

When doing a trail balance what are the key words that you should look for if it is accounts receivable?

A

Provide and on account

36
Q

When your paying someone on account is it accounts payable or accounts receivable?

A

Accounts Payable

37
Q

When someone is paying you on account is it accounts payable or accounts receivable?

A

Accounts Receivable

38
Q

What effect does the payment of dividends have on the accounting equation?

a. Assets decrease and equity increases
b. Assets decrease and equity decreases
c. Assets decrease and liabilities increase
d. Assets increase and equity increases

A

b. Assets decrease and equity decreases

39
Q

What does the word debit mean?

a. Left side
b. Right side
c. Increase
d. Decrease

A

a. Left side

40
Q

What provides a chronological record of all transactions?

A

A Journal

41
Q

What format is used for recording transactions?

A

A Journal Entry

42
Q

What is the process of transferring the debit and credit information from the journal to individual accounts in the general ledger?

A

Posting

43
Q

What provides in a single location the list of transactions affecting each account and the account’s balance?

A

A General Ledger

44
Q

What goes in the first row of a T-account?

A

The beginning balance

45
Q

What is a simplified version of general ledger account?

A

A T-account

46
Q

What is the layout of a journal entry?

A

Date Debit D$
Credit C$
Description

47
Q

Which of the following is used to provide a chronological record of all transactions affecting a firm?

a. The general ledger
b. The journal
c. The trial balance
d. The income statement

A

b. The journal

48
Q

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

a. Cash
b. Rent Expense
c. Prepaid Rent
d. Rental Income

A

c. Prepaid Rent

49
Q

What is a list of all accounts and their balances at a particular date?

A

A Trial Balance

50
Q

What does a trial balance show?

A

That total debits equal total credits

51
Q

Are trial balances used for internal or external purposes only?

A

Internal purposes

52
Q

Which of the following accounts would appear in the credit column of a trial balance?

a. Prepaid Rent
b. Dividends
c. Common Stock
d. Salaries Expense

A

c. Common Stock

53
Q

Below are the steps in the measurement process of external transactions. Arrange them from first (1) to last (6).

a. Post the transaction to the T-accounts in the general ledger.
b. Assess whether the impact of the transaction results in a debit or credit to account balances.
c. Use source documents to identify accounts affected by an external transaction.
d. Analyze the impact of the transaction on the accounting equation.
e. Prepare a trial balance.
f. Record the transaction using debits and credits.

A
  1. C
  2. D
  3. B
  4. F
  5. A
  6. E
54
Q

Pair the term and phrase associated with the measurement process for external transactions: Account

a. Chronological record of all transactions affecting a company.
b. Determine the dual effect of business events on the accounting equation.
c. List of accounts and their balances at a particular date.
d. Summary of the effects of all transactions related to a particular item over a period of time.
e. Transfer balances from the journal to the general ledger.

A

d. Summary of the effects of all transactions related to a particular item over a period of time.

55
Q

Pair the term and phrase associated with the measurement process for external transactions: Analyze Transactions

a. Chronological record of all transactions affecting a company.
b. Determine the dual effect of business events on the accounting equation.
c. List of accounts and their balances at a particular date.
d. Summary of the effects of all transactions related to a particular item over a period of time.
e. Transfer balances from the journal to the general ledger.

A

b. Determine the dual effect of business events on the accounting equation.

56
Q

Pair the term and phrase associated with the measurement process for external transactions: Journal

a. Chronological record of all transactions affecting a company.
b. Determine the dual effect of business events on the accounting equation.
c. List of accounts and their balances at a particular date.
d. Summary of the effects of all transactions related to a particular item over a period of time.
e. Transfer balances from the journal to the general ledger.

A

a. Chronological record of all transactions affecting a company.

57
Q

Pair the term and phrase associated with the measurement process for external transactions: Post

a. Chronological record of all transactions affecting a company.
b. Determine the dual effect of business events on the accounting equation.
c. List of accounts and their balances at a particular date.
d. Summary of the effects of all transactions related to a particular item over a period of time.
e. Transfer balances from the journal to the general ledger.

A

e. Transfer balances from the journal to the general ledger.

58
Q

Pair the term and phrase associated with the measurement process for external transactions: Trial Balances

a. Chronological record of all transactions affecting a company.
b. Determine the dual effect of business events on the accounting equation.
c. List of accounts and their balances at a particular date.
d. Summary of the effects of all transactions related to a particular item over a period of time.
e. Transfer balances from the journal to the general ledger.

A

c. List of accounts and their balances at a particular date.

59
Q

For each transaction, describe the dual effect on the accounting equation:

Paint houses in the current month for $15,000 on account

A

Assets and Stockholders’ Equity increase

60
Q

For each transaction, describe the dual effect on the accounting equation:

Purchase painting equipment for $16,000 cash

A

Assets increase and decrease

61
Q

For each transaction, describe the dual effect on the accounting equation:

Purchase office supplies on account for $2,500

A

Assets and Liabilities increase

62
Q

For each transaction, describe the dual effect on the accounting equation:

Pay employee salaries of $3,200 for the current month

A

Assets and Stockholders’ Equity decrease

63
Q

For each transaction, describe the dual effect on the accounting equation:

Purchase advertising to appear in the current month, $1,200

A

Assets and Stockholders’ Equity decrease

64
Q

For each transaction, describe the dual effect on the accounting equation:

Pay office rent of $4,400 for the current month

A

Assets and Stockholders’ Equity decrease

65
Q

For each transaction, describe the dual effect on the accounting equation:

Receive $10,000 from customers in 1 above (Paint houses in the current month for $15,000 on account)

A

Assets and Stockholders’ Equity increase

66
Q

What is the order of the accounts on a trial balance?

A
  1. Assets
  2. Liabilities
  3. Stockholders’ Equity
  4. Revenue
  5. Expenses
67
Q

What is the difference between an adjusted and unadjusted trial balance?

A

The adjusted trial balance includes depreciation expense and accumulated depreciation and uses the total account amounts after including the adjusting entries. The unadjusted trial balance does not use those accounts and it uses the total account amounts before the adjusting entries were added in.

Principles of Accounting - Financial (11 decks)

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