Concepts in chapter 3

Question 1

What is an easy way to remember debits and credits (word)

Answer 1

Dealer: dividends + expenses + assets = liabilities + owner’s equity + revenue

Question 2

What is the normal balance for assets

Answer 2

Debit

Question 3

What is the normal balance for liabilities

Answer 3

Credit

Question 4

What is the normal balance for common stock

Answer 4

Credit

Question 5

What is the normal balance for retained earnings

Answer 5

Credit

Question 6

What is the normal balance for dividends

Answer 6

Debit

Question 7

What is the normal balance for Revenues

Answer 7

credit

Question 8

What is the normal balance for Expenses

Answer 8

debit

Question 9

What financial statement are common stock and retained earnings reported on

Answer 9

Stockholders equity section of the balance sheet

Question 10

What financial statement are dividends reported on

Answer 10

Retained earning statement

Question 11

What financial statement are revenues and expenses reported on

Answer 11

Income statement

Question 12

The journal makes three significant contributions to the recording process:

Answer 12

1. It discloses in one place the complete effect of a transaction.
2. It provides a chronological record of transactions.
3. It helps to prevent or locate errors because the debit and credit amounts for each entry can be readily compared.

Question 13

General ledger:

Answer 13

A ledger that contains all asset, liability, stockholders’ equity, revenue, and expense accounts.

Question 14

Chart of accounts and the order the accounts go in

Answer 14

A list of a company’s accounts. They are in this order: Assets, Liabilities, Stockholders’ Equity, Revenues, Expenses

Question 15

Posting

Answer 15

The procedure of transferring journal entry amounts to the ledger accounts.

Question 16

Posting involves these steps:

Answer 16

1. In the ledger, enter in the appropriate columns of the debited account(s) the date and debit amount shown in the journal.
2. In the ledger, enter in the appropriate columns of the credited account(s) the date and credit amount shown in the journal.

Question 17

What is analyzing

Answer 17

The purpose of transaction analysis is first to identify the type of account involved and then to determine whether a debit or a credit to the account is required.

Question 18

The trial balance lists accounts and balances AT A GIVEN TIME. What are three things it is useful for?

Answer 18

The trial balance proves the mathematical equality of debits and credits after posting.
A trial balance may also uncover errors in journalizing and posting.
A trial balance is useful in the preparation of financial statements.

Question 19

procedures for preparing a trial balance:

Answer 19

1. List the account titles and their balances.
2. Total the debit column and total the credit column.
3. Verify the equality of the two columns.

Question 20

the order of presentation in the trial balance is:

Answer 20

Assets
Liabilities
Stockholders' equity
Revenues
Expenses

Question 21

What are the limitations of a trial balance?

Answer 21

the trial balance may balance even when any of the following occurs: (1) a transaction is not journalized, (2) a correct journal entry is not posted, (3) a journal entry is posted twice, (4) incorrect accounts are used in journalizing or posting, or (5) offsetting errors are made in recording the amount of a transaction.