ACC 925 Chapter Notes - Chapter 2: Accounting Equation, Financial Statement

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10 Oct 2016

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Double entry system: a double entry system makes sure two accounts get affected when a transaction occurs to keep the accounting equation in balance. ** rules fo(cid:396) lia(cid:271)ilities a(cid:374)d sha(cid:396)eholde(cid:396)s" e(cid:395)uity a(cid:396)e diffe(cid:396)e(cid:374)t fo(cid:396) de(cid:271)it a(cid:374)d (cid:272)(cid:396)edits. For these accounts the left side (debit) decreases while the right side (credit) increases when a transaction occurs. The chart of accounts: the chart of accounts is used to keep track of all accounts. The t account consists of two slides, the debit and credit. The debit is the left side and displays increases and the credit is the left side which displays decreases. Increases in assets are recorded on the left side (debit) Decreases in assets are recorded on the right side (credit) Increases in liabilities are recorded on the left side (debit) Decreases in liabilities are recorded on the right side (credit) Journal: the journal is a book accountants use to list and record transactions.

Related Questions

In this chapter we were provided a chart of accounts withsixteen accounts in exhibit 2 in the text.

From that chart of accounts select an account (try to pick onethat has not been discussed yet), in the subject box put theaccount title you selected, then do the following:

1. Assets, Liabilities, Owner's Equity, Revenues, and Expensesare the five categories (account types) that an account can beclassified as. Which category is the account you selected includedin?

2. The double-entry accounting system has specific rules forrecording debits and credits based on the type of account. Describehow these rules apply to the account you selected. How is theaccount increased and how is it decreased?

3. The normal balance of an account can be either a debit or acredit depending on whether increases in the account are recordedas debits or credits. What is the normal balance of the account youselected?

4. Think of a transaction that your account would be used in. Donot copy an entry from the book. Describe and illustratejournalizing the transaction, in the proper journal entryformat.

From that chart of accounts select an account (try to pick onethat has not been discussed yet), in the subject box put theaccount title you selected, then do the following:

1. Assets, Liabilities, Owner's Equity, Revenues, and Expenses arethe five categories (account types) that an account can beclassified as. Which category is the account you selected includedin?

2. The double-entry accounting system has specific rules forrecording debits and credits based on the type of account. Describehow these rules apply to the account you selected.

3. The normal balance of an account can be either a debit or acredit depending on whether increases in the account are recordedas debits or credits. What is the normal balance of the account youselected?

4. Think of a transaction that your account would be used in.Describe and illustrate journalizing the transaction.

QUESTION 21 A journal entry for a $75 payment for Rent expensewas posted as a debit to Salary expense and a credit to Cash. Thiserror will cause which of the following conditions on the trialbalance? A. The sum of the credits will equal the sum of thedebits. B. The sum of the debits will exceed the sum of the creditsby $75. C. The sum of the credits will exceed the sum of the debitsby $150. D. The sum of the debits will exceed the sum of thecredits by $150.

QUESTION 22 The business receives cash from a customer that isowed to the company "on account," based on services rendered to thecustomer previously. How does the collection of the cash affect theaccounting equation? A. Assets increase; owner's equity increases.B. Assets increase; liabilities increase. C. Assets decrease;owner's equity decreases. D. One asset increases; one assetdecreases

QUESTION 23 A business completes service to a client and sendsout a sales invoice. The amount will be collected from the customerat a later time. Which of the following would be TRUE at the timewhen the invoice is sent out? A. Total assets will decrease. B. Netincome will increase. C. Owner's equity will decrease. D. Totalliabilities will increase.

QUESTION 24 Which of the following accounts increases with adebit? A. Cash B. Interest Payable C. Accounts Payable D. Smith,Capital

QUESTION 25 The Accounts Receivable account of Nuptials Inc. isshown below. Accounts Receivable Dr Cr 26,000 3,500 5,000 Calculatethe ending balance of the account. A. $33,500 debit B. $31,000,debit C. $3,500, credit D. $27,500, debit

QUESTION 26 The following transactions for the month of Marchhave been journalized and posted to the proper accounts. Mar. 1Martinez invested $9,000 cash in his new design services business.Mar. 2 Paid the first month's rent of $800. Mar. 3 Purchasedequipment by paying $3,000 cash and executing a note payable for$5,000. Mar. 4 Purchased office supplies for $750 cash. Mar. 5Billed a client for $10,000 of design services completed. Mar. 6Received $8,000 on account for the services previously recorded.What is the balance in Cash? A. $13,250 B. $12,450 C. $15,450 D.$14,000

QUESTION 27 Which of the following sequences states the order inwhich a trial balance lists accounts? A. Equity â Assets âLiabilities B. Liabilities â Assets â Equity C. Assets â Equity âLiabilities D. Assets â Liabilities â Equity

QUESTION 28 Which of the following statements is FALSE? A. Atrial balance shows total amounts for assets, liabilities, andequity. B. A trial balance is created before the balance sheet isprepared. C. A trial balance presents data in debit and creditformat, but a balance sheet does not. D. A trial balance showstotal debits and total credits.

QUESTION 29 A promise received from a business's customers topay for goods and services that they received from the business iscalled a(n): A. revenue. B. account receivable. C. account payable.D. expense.

QUESTION 30 You can evaluate the economic resources, debt, andoverall financial position of a company in which of the followingfinancial statements? A. Income statement B. Balance sheet C.Statement of owner's equity D. Statement of cash flows

QUESTION 31 A book holding all of the accounts is called the: A.income statement. B. journal. C. ledger. D. balance sheet.

QUESTION 32 Which of the following groups of accounts BOTHnormally have a debit balance? A. Assets and Liabilities B.Liabilities and Owner's equity C. Revenues and Expenses D. Assetsand Expenses

QUESTION 33 A business buys $500 of supplies on account. Whichaccount is debited? A. Supplies B. Cash C. Service revenue D.Accounts payable

ACC 925 Chapter Notes - Chapter 2: Accounting Equation, Financial Statement

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