ACCT 211 Chapter 3

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.

Which of the following events is not recorded in the accounting records?

An employee is terminated.

During 2010, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity:

increased $40,000

Expenses decrease retained earnings

True

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

increases an asset; increases a liability

Payment of a dividend

decreases cash; decreases retained earnings.

If a company receives cash from a customer before performing services for the customer, then:

assets increase and liabilities increase.

Which of the following 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 by all except which one of the following?

An account is a source document.

Which statement about an account is true?

An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items.

Every account has a left or credit side and a right or debit side.

False

Every transaction affects at least two accounts.

True

Which statement about an account is true?

In its simplest form, an account consists of three parts.

Debits

increase assets and decrease liabilities

A revenue account

is increased by 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

Assets are increased with credits

False

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
300-900= 600

Which of the following is the correct sequence of events?

Analyze a transaction; record it in the journal; post it to the ledger.

At September 1, 2011, Five-O Inc. reported retained earnings of $136,000. During the month, Five-O generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the balance in retained ea

$142,000 credit
R-E= 8000
BegRE+NI-D=142,000

What is the evidence that a transaction has occurred?

Source document

Which is not part of the recording process?

Preparing a trial balance

Which of these statements about a journal is false?

It contains only revenue and expense accounts.

Transactions are recorded in chronological order in the general journal.

True

Which of the following is not a part of a complete journal entry?

The balance of each account affected by the transaction

Where is the first place every transaction is recorded?

In 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

The entire group of accounts maintained by a company is referred to collectively as the journal.

False

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 collection of the entire group of accounts maintained by a company.

Posting

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.

Posting

is the procedure of transferring journal entry amounts to the ledger accounts

Which of the following 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

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

the order that they appear in the ledger

A trial balance

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.

Issuance of stock is an investing activity.

False

On. Jan. 10, Novis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this?

Investing activity

In what section of the statement of cash flows would the purchase of office equipment for $10,000 appear?

Investing activities

Which of the following is not one of the primary types of the financing activities in the statement of cash flows?

Buying equipment

Which of the following is one of the issues that the SEC said should be considered in deciding if the United States should adopt IFRS?

Whether IFRS is sufficiently developed and consistent in applications

Which of the following differs somewhat under IFRS compared to U.S. GAAP?

The accounting equation

Which statement is true concerning IFRS?

IFRS may differ somewhat in principles from U.S. GAAP.