The effect on the basic accounting equation of performing services for cash are to: |
increase assets and increase stockholders’ equity. |
Genesis Company buys a $900 machine on credit. This transaction will immediately affect the |
balance sheet only. |
What all is recorded in the accounting records? |
-A cash investment is made into the business. -Equipment is purchased on account. -The owner withdraws cash for personal use. |
During 2010, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders’ equity: |
increased $40,000. |
Retained earnings is decreased by |
Expenses |
If an expense is paid with cash |
assets will decrease. |
If cash is received in advance from a customer |
Liabilities will increase |
Receipt of an unearned revenue does what? |
increases an asset; increases a liability. |
Payment of a dividend does what? |
decreases cash; decreases retained earnings. |
If a company receives cash from a customer before performing services for the customer, then what will happen? |
assets increase and liabilities increase. |
What is an acceptable effect if total liabilities increase by $5,000 as a result of a transaction? |
Assets increase by $5,000, or stockholders’ equity decrease by $5,000. |
An account is a part of the financial information system and is described as? |
-An account consists of three parts. -An account has a title. -An account has a debit and credit side. |
An account is an… |
individual accounting record of increases and decreases in specific asset, liability, and stockholders’ equity items. |
In its simplest form, an account consists of how many parts? |
3 |
What do debits do? |
Increase assets and decrease liabilities. |
A revenue account Is increased by what? |
Credits |
Which accounts normally have debit balances? |
Assets, dividends, and expenses |
What effects occur when an account payable is paid with cash? |
Decreases assets and decreases liabilities |
Accounts with normal debit balances include: |
expenses and assets. |
Accounts with normal credit balances include: |
liabilities and stockholders’ equity |
Which accounts normally have credit balances? |
Revenues, liabilities, and retained earnings |
An account has $300 on the debit side and $900 on the credit side. How much is the account balance? |
Credit of $600 |
State the correct sequence of events |
Analyze a transaction; record it in the journal; post it to the ledger. |
What is the evidence that a transaction has occurred? |
Source document |
Parts of the recording process |
-Posting transactions -Analyzing transactions -Entering transactions in a journal |
what does a journal do? |
-It discloses the complete effect of a transaction in one place. -It provides a chronological record of transactions. -It helps to locate errors because the debit and credit amounts for each entry can be readily compared. |
Parts of the complete journal entry |
-The date of the transaction. -A brief explanation of the transaction. -The accounts and amounts to be debited and credited. |
Where is the first place every transaction is recorded? |
The journal |
What transaction is recorded as a result of issuing stock to investors for cash? |
A debit to Cash and a credit to Common Stock |
A complete journal entry does not show |
the new balance in the accounts affected by the transaction. |
Transactions are initially recorded in chronological order in a __________ before they are transferred to the accounts. |
Journal |
What does a general ledger of a company contain? |
All the asset, liability, stockholders’ equity, revenue, and expense accounts |
What type of account is unearned revenue? |
Liability |
What is the entire group of accounts maintained by a company collectively called? |
Ledger |
What is the appropriate order for a company’s chart of accounts? |
Assets, liabilities, stockholders’ equity, revenues, expenses |
A ledger is a what? |
collection of the entire group of accounts maintained by a company. |
Posting does what? |
transfers journal entries to ledger accounts. |
What is the process of transferring entries from the journal to the ledger called? |
Posting |
If an account is debited in the journal entry, then: |
That account will be debited in the ledger. |
What is the correct sequence of events? |
Journalize; post; prepare a trial balance |
If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates what? |
the mathematical equality of the accounting equation. |
When a trial balance balances, it is an indication that: |
debits equal credits. |
Accounts are listed on the trial balance in what order? |
the order that they appear in the ledger. |
A trial balance does what? |
is a list of accounts with their balances at a given time. |
A trial balance will not balance if |
a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100. |
On. Jan. 10, Novis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this? |
Investing |
In what section of the statement of cash flows would the purchase of office equipment for $10,000 appear? |
Investing activities |
Three primary types of the financing activity |
-Borrowing money -Buying equipment -Issuing shares of stock |
Chapter 3 Accounting
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