Ch 2 & 3

Question 1

What is a business transaction

Answer 1

Any financial event that changes the resources of a firm

Question 2

An owner’s financial interest is called…

Answer 2

Equity or capital

Question 3

Accounts Payable is money a firm will…

Answer 3

…Owe to creditors

Question 4

Accounts Receivable is money that is…

Answer 4

…owed to the firm.

Question 5

The property that a business owns is called an

Answer 5

Asset

Question 6

Any debt or obligation of a business is called a

Answer 6

Liability

Question 7

What is a balance sheet?

Answer 7

The status of a firm’s assets, liabilities, and the owner’s equity.

Question 8

What is the fundamental accounting equation?

Answer 8

Assets = Liabilities + Owner’s Equity

Question 9

The inflow of money is called revenue. What is the outflow called?

Answer 9

Expense

Question 10

A salary expense is written as a debit or a credit?

Answer 10

Debit

Question 11

Withdrawals are funds taken from the business by the owner for personal use. They are not an expense. What are they?

Answer 11

A decrease in the owner’s equity.

Question 12

What function does an income statement serve?

Answer 12

Shows the results of business operations for a specific period of time such as a month, quarter, or year.

Question 13

What is on an income statement?

Answer 13

Revenue earned and expenses of doing business

Question 14

Most business decisions are influenced by what type of statement?

Answer 14

Financial statement

Question 15

What is the purpose of a T account?

Answer 15

To analyze transactions

Question 16

What side of a T account is Debit?

Answer 16

Debit is always on the left. Credit is on the right.

Question 17

Is prepaid rent an asset or an expense

Answer 17

An asset

Question 18

When an asset increases, do you record it as a debit or a credit?

Answer 18

Debit

Question 19

When a liability increases, do you record it as a debit or a credit?

Answer 19

Credit

Question 20

How is revenue increased?

Answer 20

Cash payments and accounts receivable

Question 21

Expenses decrease the owner’s equity. Which side of the T account do you record expenses?

Answer 21

The LEFT side. Debit.

Question 22

Accountants do not use the terms “left or right side”. The correct term is what for the sides?

Answer 22

Debit and credit

Question 23

A statement that tests the accuracy of total debits and credits after transactions have been recorded is called what?

Answer 23

Trial Balance

Question 24

What is a chart of accounts?

Answer 24

List of all accounts used by a business

Question 25

Accounts that continue with a balance on the balance sheet at the end of an accounting period and move into the next period are called what?

Answer 25

Permanent accounts

Question 26

What are accounts called that do NOT move forward into the next period?

Answer 26

Temporary or nominal accounts.

Question 27

What two accounts appear on an income statement?

Answer 27

Revenue and expense

Question 28

Which of these accounts is not a liability? Accounts Payable, Equity, Supplies

Answer 28

Supplies

Question 29

Which of these accounts is not an asset? Accounts Receivable, Revenue, Cash

Answer 29

Revenue