Chapter 2 Financial Accounting

Question 1

Transactions

Answer 1

Any event that impacts the financial position of a business

Question 2

Where are amounts posted?

Answer 2

To the Ledger

Question 3

What are 3 examples of common liability accounts?

Answer 3

Accounts Payable
Notes Payable
Accrued Liabilities

Question 4

Expenses

Answer 4

Costs of operating a business

Question 5

What are 3 examples of debits?

Answer 5

Assets
Dividends
Expenses

Question 6

What are 2 other names for common stock

Answer 6

Capital stock

Paid in Capital

Question 7

Accrued Liabilities

Answer 7

Expenses that have not been paid

Question 8

What must always happen in a journal entry?

Answer 8

Debits must equal credits

Question 9

What does every transaction have?

Answer 9

A debit and a credit

Question 10

What are 4 examples of Equity Accounts?

Answer 10

Common Stock
Retained Earnings
Revenue
Expenses

Question 11

What are 9 examples of common asset accounts?

Answer 11

Cash
Accounts Receivable
Notes Receivable 
Inventory
Prepaid expenses
Land
Buildings 
Equipment 
Furniture and Fixtures

Question 12

What are the 2 reasons why prepaid expenses are assets?

Answer 12

Has the prefix pre which means before

Provides a future benefit

Question 13

Debit increases in what 3 things? (ADE)

Answer 13

Assets
Dividends
Expenses

Question 14

Posting

Answer 14

Transferring information from the journal to the ledger

Question 15

Revenues

Answer 15

Earned by providing goods or services

Question 16

What are revenues not?

Answer 16

Cash

Question 17

Double-entry accounting

Answer 17

Each transaction affects at least 2 accounts

Question 18

Prepaid expenses

Answer 18

Expenses paid for in advance

Question 19

What kind of industry does not have inventory?

Answer 19

Service Based Industries

Question 20

The Account

Answer 20

Record of all changes in a particular asset, liability or equity

Question 21

What are the 2 sides of a transaction?

Answer 21

Business gives something

Business receives something

Question 22

What are expenses not?

Answer 22

Cash

Question 23

What 2 terms are neutral

Answer 23

Debit

Credit

Question 24

What are 2 examples of cash?

Answer 24

Credit Card

Debit Card

Question 25

The Journal

Answer 25

Chronological records of transactions

Question 26

What are three steps to journaling?

Answer 26

• Identify accounts impacted by transaction
• Apply debit / credit rules for the increase or decrease in the accounts
• Record transactions in journal

Question 27

Where are transactions recorded?

Answer 27

In Journal

Question 28

Credit increases in what 3 things?

Answer 28

Liabilities
Revenue
Common Stock
Retained Earnings

Question 29

Inventory

Answer 29

Products held for sale