Chapter 2

Question 1

Balance sheet accounts are arranged into how many categories?

Answer 1

3

Question 2

Owner, Capital & Owner, Withdrawals are examples of what accounts?

Answer 2

Equity

Question 3

What type of account are Accounts Payable & Note Payable?

Answer 3

Liabilities

Question 4

Accounts Receivable, Prepaid Accounts, Supplies & Land are what type of account?

Answer 4

Assets

Question 5

What is a record of increases & decreases in a specific asset, liability, equity, revenue or expense item?

Answer 5

Account

Question 6

What is a list of all accounts a company uses not including account balances called?

Answer 6

Chart of Accounts

Question 7

What is a record containing all accounts used by a company, including account balances?

Answer 7

General Ledger

Question 8

What describes transactions entering an accounting system, such as a purchase order, sales receipt or check?

Answer 8

Source Document

Question 9

What is a complete record of every transaction recorded?

Answer 9

Journal

Question 10

Which accounts have a normal debit balance?

Answer 10

Assets, Withdrawals, Expenses

Question 11

Which accounts have a normal credit balance?

Answer 11

Liabilities, Capital, Revenue

Question 12

What are the starting points of financial statements?

Answer 12

Transactions & events

Question 13

What type of account is Unearned Revenue?

Answer 13

Liability

Question 14

Which accounts increase Equity?

Answer 14

Revenue & Owner’s Capital

Question 15

Which accounts decrease Equity?

Answer 15

Expenses & Owner Withdrawals

Question 16

What represents a ledger account & is used to show the effects of one or more transactions?

Answer 16

T-account

Question 17

What increases liabilities & equity?

Answer 17

Credit

Question 18

What is the 4-step process of Journalizing & Posting Transactions?

Answer 18

Identify, Analyze, Record & Post

Question 19

What lists all ledger accounts & their balances at a point in time?

Answer 19

Trial Balance

Question 20

Which financial statement reports revenues minus expenses incurred by a business over a period of time?

Answer 20

Income Statement

Question 21

Which financial statement reports how equity changes over the reporting period from net income (or loss) & from any owner investments & withdrawals over a period of time?

Answer 21

Statement of Owner’s Equity

Question 22

Which financial statement reports the financial position (types & amounts of assets, liabilities & equity) at a point in time?

Answer 22

Balance Sheet

Question 23

What is the formula for Debt Ratio?

Answer 23

Total Liabilities / Total Assets

Question 24

What evaluates the level of debt risk?

Answer 24

Debt Ratio

Question 25

What does a higher debt ratio indicate?

Answer 25

A greater probability that a company will not be able to pay its debt in the future.

Question 26

What broadly groups accounts into assets, liabilities & equity?

Answer 26

Unclassified Balance Sheet

Question 27

What is a written promise of another entity to pay a specific sum of money on a specified future date to the holder?

Answer 27

Note Receivable or Promissory Note

Question 28

Which asset account becomes expenses once expired & used?

Answer 28

Prepaid Accounts

Question 29

What are customers & others who owe a company called?

Answer 29

Debtors

Question 30

What are packaging & cleaning materials considered?

Answer 30

Store Supplies

Question 31

What is the term for when an asset is used & wears down so its cost is gradually reported as an expense?

Answer 31

Depreciation

Question 32

What are claims by creditors against assets?

Answer 32

Liabilities

Question 33

Who are individuals & organizations that have rights to receive payments from a company?

Answer 33

Creditors

Question 34

A note payable is different from an account payable because why?

Answer 34

It comes from a formal contract called a promissory note & requires interest.

Question 35

What's another term for accounts payable?

Answer 35

Trade Payables

Question 36

What 2 words almost always identify liability accounts?

Answer 36

Payable & Unearned

Question 37

What groups accounts into classifications (such as land & buildings into Plant Assets) & it reports current assets & liabilities before noncurrent assets & liabilities?

Answer 37

Classified Balance Sheet

Question 38

What is the owner's residual interest in the assets of a business after subtracting liabilities?

Answer 38

Equity

Question 39

Which account are owner investments recorded in?

Answer 39

Owner Capital

Question 40

What is the opposite of owner investments?

Answer 40

Withdrawals

Question 41

What always increases equity?

Answer 41

Revenues

Question 42

What always decrease equity?

Answer 42

Expenses

Question 43

What is the left side of an account called?

Answer 43

Debit

Question 44

What is the right side of an account called?

Answer 44

Credit

Question 45

What terms by themselves do not mean increase or decrease?

Answer 45

Debit or Credit

Question 46

What determines whether a debit or credit increases or decreases?

Answer 46

Account

Question 47

What is it called when total debits exceed total credits?

Answer 47

Debit Balance

Question 48

What is the term for when total credits exceed total debits?

Answer 48

Credit Balance

Question 49

What is the transfer of journal entries to the ledger?

Answer 49

Posting

Question 50

What does PR stand for?

Answer 50

Posting Reference (Identification Number)

Question 51

A company that finances a relatively large portion of its assets with liabilities is said to have higher?

Answer 51

Financial Leverage