Chapter 3

Question 1

The accounting equation

Answer 1

must always balance

Question 2

Revenue does what to stockholder’s equity?

Answer 2

increases it

Question 3

Expenses do what to stockholder’s equity ?

Answer 3

decreases it

Question 4

Revenue accounts normally show what balance?

Answer 4

credit balances

Question 5

Expense accounts normally show what balance?

Answer 5

debit balance

Question 6

What contributions does the journal make to the recording process?

Answer 6

• it discloses in one place the complete effect of a transaction
• it provides a chronological record of transactions
• its helps to prevent or locate error

Question 7

Account

Answer 7

an individual accounting record of increases and decreases in specific asset,liability, stock holder’s equity, revenue or expense items

Question 8

Accounting information system

Answer 8

the system of collecting and processing transaction data and communicating financial information to decision makers

Question 9

Accounting Transactions

Answer 9

Events that require recording in the financial statements because they affect assets, liabilities, or stockholder’s equity

Question 10

Credit

Answer 10

the right side of an account

Question 11

Debit

Answer 11

the left side of an account

Question 12

Double-entry system

Answer 12

A system that records the two-sided effect of each transaction in appropriate accounts

Question 13

General Journal

Answer 13

the most basic form of journal

Question 14

General ledger

Answer 14

-a ledger that contains all asset liability, stockholder’s equity, revenue, and expense accounts

Question 15

Journal

Answer 15

An accounting record in which transactions are initially recorded in chronological order

Question 16

Journalizing

Answer 16

The procedure of entering transaction data in the journal