Ch. 2

Question 1

Name 7 assets accounts

Answer 1

1. Cash
2. Accounts receivable
3. Notes receivable
4. Prepaid expenses
5. Land
6. Building
7. Equipment, furniture, and fixtures

Question 2

What are 4 examples of liability accounts

Answer 2

1. Accounts payable
2. Notes payable.
3. accrued liability
4. Unearned revenue

Question 3

A list of all of a company’s accounts with their account numbers

Answer 3

Chart of accounts

Question 4

What are 4 equity accounts

Answer 4

1. Common Stock
2. Dividends
3. Revenues
4. Expenses

Question 5

The record holding all the accounts of a business, the changes in those accounts, and their balances.

Answer 5

Ledger

Question 6

A system of accounting in which every transaction affects at least two accounts

Answer 6

Double-entry accounting

Question 7

A summary device that is shaped like a capital T with debits posted on the left side and credits on the right side

Answer 7

T-account

Question 8

In financial accounting, debit and credit mean what

Answer 8

Debit = left
Credit = right

Question 9

How do you know if debits and credits increase or decrease

Answer 9

Assets are on the right side of the equation, so the left side, debits, increases. Common Stock, Expenses and liabilities are on the left side, so the right side, credits, increases. opposite for dividends and expenses, they match assets.

Question 10

What side is the normal balance on

Answer 10

Whatever side increases

Question 11

What phrase helps remember what accounts have normal balance on right and left

Answer 11

A Elephants Do Love Rowdy Children

Question 12

Provides the evidence and data for accounting transactions

Answer 12

Source Documents

Question 13

What are some examples of source documents

Answer 13

Checks, deposit slips, and invoices

Question 14

What is the flow of accounting data

Answer 14

1. Transaction occurs
2. Source Documents are prepared
3. Transactions are analyzed
4. Transactions are journalized and posted.

Question 15

A record of transaction in date order

Answer 15

Journal

Question 16

Transferring data from the journal to the ledger

Answer 16

Posting

Question 17

Steps for Journalizing and posting transactions

Answer 17

1. Identify the accounts and account types
2. Decide whether each account incresases or decreases, then apply the rules for debits and credits
3. Record the transaction in the journal
4. Post the journal entry to the ledger
5. Determine whether the accounting equation is in balance

Question 18

A list of all leger accounts with their balances at a point in time

Answer 18

Trial Balance

Question 19

Three things to check if your trial balance is wrong

Answer 19

1. Search for missing accounts
2. Divide by 2 (possible entry in wrong side)
3. Divide by 9 (possible transition or swapping of first two digits in entry).

Question 20

The process by which companies produce their financial statements for a specific period of time

Answer 20

Accounting cycle

Question 21

What are the four steps to the accounting cycle

Answer 21

1. Start with the beginning balance
2. Analyze and journalize transactions in the journal
3. Post journal entries to the accounts in the ledger
4. Prepare unadjusted trial balance

Question 22

What’s the formula for return on assets

Answer 22

Net income/Average total assets

Question 23

What is debt ratio, and how do you calculate it

Answer 23

Proportion of assets financed with debt
Total liabilities/total assets