CHPT 2

Question 1

Business Acitivites that effect the basic accounting equation are

Answer 1

Transactions

Question 2

There are two types of Transactions, which are?

Answer 2

External Exchanges (involving assets liabilities and Stockholders) and Internal Events (Exchanges that occur within the company itself)

Question 3

What is the accounting cycle?

Answer 3

1) Analyze
2) Record
3) Summarize
4) Prepare Trial Balance
5) Report Financial Statements

Question 4

Define Duality of Effects

Answer 4

Every transaction has at least two effects on the basic accounting equation. “give or receive” “push or pull”

Question 5

Define Chart of Accounts

Answer 5

a list that designates a name and reference number the company will use when accounting for each item it exchanges

Question 6

Transactions are analyzed and their financial effects are entered into…

Answer 6

journals

Question 7

Assests increase on the..

Answer 7

left side as a debit

Question 8

Liabilities increase on the…

Answer 8

right side as a credit

Question 9

Stock Holder’s Equity increase on the…

Answer 9

right side as a credit

Question 10

The normal balance of an account is

Answer 10

the side on which it increases

Question 11

debits must always equal

Answer 11

credits

Question 12

credits must always equal

Answer 12

debits

Question 13

the ending balance in financial analysis is always

Answer 13

double underlined

Question 14

Classified Balance Sheet

Answer 14

a classified balance sheet contains subcategories for assets and libailities labeled current

Question 15

Trial Balance

Answer 15

It checks that the accounting records are in balance by determining if debits=credits

Question 16

Current Assest

Answer 16

Are assets that the business will use up or turn into cash within the next 12 months

Question 17

Crrent Liabailites

Answer 17

Are debts and other obligations that will be paid or fulfilled within the next 12 months of the balance sheet date

Question 18

Current Ratio

Answer 18

by dividing current assets by current liabilities (a higher ratio means better ability to pay/wether current assets are enough to pay off current liabilities)

Question 19

What does a balance sheet tell us?

Answer 19

the purpose is to show what a company owns and owes

Question 20

Balance Sheet

Answer 20

Reports Assets Liabilities and stock holder equity

Question 21

Liabilities

Answer 21

Amount presently owed by the business

Question 22

The basic accounting equation

Answer 22

Assests=Liabilities +S/E

Question 23

Current Assests

Answer 23

Economic resources to be used or turned into cash within one year

Question 24

Retained Earnings

Answer 24

Cumulative earnings of a company that have not yet been distributed to the owners

Question 25

Notes Payable

Answer 25

The account credited when money is borrowed from a bank using a promissory note

Question 26

Transaction

Answer 26

An exchange or event that has a direct and measurable financial effect

Question 27

Seperate Entity Assumption

Answer 27

Accounts got a business seperate from its owners

Question 28

Daulity of Effects

Answer 28

Every transaction has at least two effects

Question 29

Debit

Answer 29

Increase Assets decrease liabilities and stock holders equity