Module 2

Question 1

Every financial transaction is recorded in the company’s financial records in what is known as _________.

Answer 1

The recording process

Question 2

What is the recording process?

Answer 2

ID transaction > understand transaction > create journal entry > post to t-accounts > create trial balance > create financial statements

Question 3

Which two parts of the recording process are a part of the balance sheet?

Answer 3

ID transactions and understand transactions

Question 4

List the types of asset accounts.

Answer 4

Accounts Receivable
Cash
Deferred Tax Asset
Fixed Assets
Goodwill
Interest Receivable 
Inventory
Investments
Notes Receivable
Other Intangible Assets
Other Prepaid Expenses
Prepaid Insurance
Prepaid Rent
Property, Plant, & Equipment (P, P, & E)

Question 5

List the types of Liability Accounts.

Answer 5

Accounts Payable
Accrued Interest
Accrued Taxes
Accrued Wages
Current Portion of Notes Payable
Deferred Tax Liability
Deferred Revenue
Interest Payable
Long Term Debt
Notes Payable
Short Term Debt
Taxes Payable
Wages Payable

Question 6

List the types of Equity Accounts.

Answer 6

Capital Stock
Common Stock
Paid-In Capital
Preferred Stock
Retained Earnings
Treasury Stock

Question 7

List the types of Revenue Accounts (falls into owner’s equity).

Answer 7

Interest Revenue
Miscellaneous Revenue
Rent Revenue
Sales
Sales Revenue

Question 8

List the types of Expense Accounts.

Answer 8

Cost of Goods Sold
Depreciation Expense
Interest Expense
Office Supplies Expense
Rent Expense
Research & Development Expense
Travel Expense

Question 9

T/F: Each business is free to determine what accounts are necessary to capture the activities of their business.

Answer 9

True

Question 10

Chart of Accounts definition

Answer 10

list of all of the accounts of a business. The list includes all asset, liability, equity, revenue, and expense accounts. The accounts and naming of accounts can vary from business to business.

Question 11

What should be considered when choosing which accounts to include in the chart of accounts?

Answer 11

Materiality

Question 12

What are the two halves of an accounting entry?

Answer 12

Debits (left) & Credits (right)

Question 13

Which accounts do debits increase the balance of?

Answer 13

Debits increase the balances in Asset and Expense accounts.

Question 14

Which accounts do debits decrease the balance of?

Answer 14

Debits reduce the balances in Revenue, Liability, and Owners’ Equity accounts.

Question 15

Where are debits shown?

Answer 15

Debits are shown on the left side in journal entries, T-Accounts, and trial balances.

Question 16

Which accounts do credits increase the balance of?

Answer 16

Credits increase the balances in Revenue, Liability, and Owners’ Equity accounts.

Question 17

Which accounts do credits decrease the balance of?

Answer 17

Credits reduce the balances in Asset and Expense accounts.

Question 18

Where are credits shown?

Answer 18

Credits are shown on the right side in journal entries, T-Accounts, and trial balances.

Question 19

Does accounts payable increase or decrease with a credit?

Answer 19

increase

Question 20

Does cash increase or decrease with a credit?

Answer 20

decrease

Question 21

Does notes receivable increase or decrease with a debit?

Answer 21

increase

Question 22

Does common stock increase or decrease with a debit?

Answer 22

decrease

Question 23

Should a company debit or credit cash received from a customer and money borrowed from a bank loan?

Answer 23

debit

Question 24

Should a company debit or credit wages paid to employees and money paid for inventory purchased?

Answer 24

credit

Question 25

Should a company debit or credit suppliers paid for prior purchases and a third party paid the amount owed for a credit purchase?

Answer 25

debit

Question 26

Should a company debit or credit inventory purchased on account and supplies purchased on credit?

Answer 26

credit

Question 27

Journal Entry definition

Answer 27

The entry made to record a transaction in the financial records of a business. The information entered will include the accounts impacted, the dollar (or other currency) amounts involved, the date of the transaction, and often some notes explaining the transaction.

Question 28

What two columns must a journal entry always include at least one of?

Answer 28

A journal entry always includes at least one debit and at least one credit, and the total debits must always equal the total credits.

Question 29

Every journal entry has one line for _______.

Answer 29

Each account affected.

Question 30

What is the minimum number of accounts affected per transaction in a journal entry?

Answer 30

at least 2

Question 31

T/F: The total of all debits must equal the total of all credits.

Answer 31

True

Question 32

Which comes first, the credit or the debit?

Answer 32

Debit.

Question 33

Record the following transaction: On June 1, 2013 Cardullo’s purchased a case of Vermeiren Cookie Spread as inventory from its supplier for $200 and paid in cash.

Answer 33

Date
Account: Inventory
Debit: $200

Date
Account: cash
Credit: $200

Question 34

Record the following transaction: Billie’s Beehives (BB) purchased a shipment of beehives on June 1, 2014 to sell to local beekeepers. It paid $500 for 100 hives.

Answer 34

Date
Account: inventory
Debit: $500

Date
Account: cash
Credit: $500

Question 35

Record the following transaction: Accounts payable pays a supplier for $900 worth of merchandise purchased on credit.

Answer 35

Date:
Account: Accounts payable
Debit: $900

Date:
Account: Cash
Credit: $900

Question 36

Record the following: A business pays $500k of dividends to its shareholders.

Answer 36

Date:
Account: dividends payable
Debit: $500k

Date:
Account: Cash
Credit: $500k

Question 37

T-account definition

Answer 37

T-accounts are a simplified version of ledger accounts. A T-account shows all the activity for a given account for a specific period of time, or in other words, the T-account is the summary of several journal entries.

Question 38

Where is debit activity shown on a t-account? Where is credit shown?

Answer 38

By convention, all debit activity is shown on the left side of T-accounts and all credit activity is shown on the right side of the T-accounts.

Question 39

T/F: There is one t-account for all activity in a business.

Answer 39

False - There is a separate T-Account for each account, such as Cash or Accounts Receivable

Question 40

T/F: Every T-account has a beginning and an ending balance, though the balance may be zero

Answer 40

True

Question 41

T/F: A T-account covers activity for a period of time, for example, the month of January or the year 2014

Answer 41

True

Question 42

T/F: Each transaction only affects one t-account.

Answer 42

False - Every transaction will affect at least two T-accounts

Question 43

T/F: If you add the ending balances of all T-accounts, the total of all debits must equal the total of all credits

Answer 43

True

Question 44

Does cash increase or decrease in a t-account?

Answer 44

Cash is an asset account and it is decreased by credits (on the right in T-accounts).

Question 45

Does an expense increase or decrease in a t-account?

Answer 45

Expense accounts are increased by debits (on the left in T-accounts).