Chapter 3

Question 0

Debit

Answer 0

Left

Question 1

Account

Answer 1

An arrangement that shows the effect of transactions on an account

Question 2

Credit

Answer 2

Right

Question 3

Normal balance of assets

Answer 3

Debit

Question 4

Nb of expenses

Answer 4

Debit

Question 5

NB of liabilities

Answer 5

Credit

Question 6

NB of equity

Answer 6

Credit

Question 7

NB of revenue

Answer 7

Credit

Question 8

Stockholders equity =

Answer 8

Common stock + retained earnings + revenues - dividends - expenses

Question 9

Corporation equity accounts

Answer 9

1. Common stock
2. Additional paid-in capital
3. Dividends declared
4. Retained earnings

Question 10

What to record?

Answer 10

FASB states, “transactions and other events and circumstances that affect a business enterprise”

Question 11

Types of events: external

Answer 11

Between a business and its environment

Question 12

Types of events: internal

Answer 12

Event occurring entirely within a business

Question 13

General Journal

Answer 13

A chronological record of transactions

Question 14

Where are journal entires recorded?

Answer 14

In the journal

Question 15

The purpose of transaction analysis

Answer 15

1) to identify the type of account involved.

2) to determine whether a debit or credit is required.

Question 16

Trial balance

Answer 16

A list of each account and its balance, used to prove equality of debit and credit balances.

Question 17

Adjusting entires make it possible to…

Answer 17

1) Report on the statement of financial position the appropriate assets, liabilities, and equity and the statement date.
2) report on the income statement the proper revenues and expenses for the period.

Question 18

When are revenues recorded?

When are expenses recognized?

Answer 18

Revenues are recorded in the period in which they are earned

Expenses are recognized in the period in which they are incurred

Question 19

Two types of adjusting entries.

Answer 19

1. Prepayments

2. Accruals

Question 20

Two types of prepayments

Answer 20

1. Prepaid expenses

2. Unearned revenues

Question 21

Prepaid expense

Answer 21

Expenses paid in cash and recorded as assets BEFORE they are used or consumed.

Question 22

Unearned revenues

Answer 22

Revenues received in cash and recorded as liabilities BEFORE they are earned.

Question 23

Two types of accruals

Answer 23

1. Accrued revenues

2. Accused expenses

Question 24

Accrued revenues

Answer 24

Revenues earned but NOT YET RECEIVED in cash or recorded

Question 25

Accrued expenses

Answer 25

Expenses incurred but NOT YET PAID in cash or recorded

Question 26

Deferrals are the same as

Answer 26

Prepayments

Question 27

Closing entries

Answer 27

1. The reduce the balance of the income statement (revenue and expense) accounts to zero
2. To transfer net income to owners equity
3. Balance sheet accounts are not closed.
4. Dividends are closed directly to retained earnings account