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chapter 3 financial accounting

stockholders equity is increased by
revenues
the purchase of an asset for cash
leaves total assets unchanged
the payment of a liability
decreases assets & liabilities
a revenue generally
increases assets & stockholders equity
a paid dividend
decreases assets & stockholders equity
an expense
decreases stockholders equity
are advanced receipts from customers treated as revenue at the time of receipt? why or why not?
no, revenue cannot be recognized until the work is performed
is the purchase of equipment treated as an expense at the time of purchase? why or why not?
no, the cost needs to be allocated to the years of expected use
the left side of an account is
the debit side
the right side of an account
is the credit side
an account consists of
a title, a debit side, and a credit side
a debit to an asset account indicates
increase in the asset
debits
increase assets and decrease liability
the normal balance of any account is the
side which increases that amount
the double- entry system requires that each transaction must be recorded
in at least two different accounts
which of the following describes the classification and normal balance of the retained earnings account
stockholders equity, credit
a revenue account
is increased by credits
which accounts normally have credit balances
revenues, liabilities, and retained earnings
a company that receives money in advance of performing a service
debits cash and credits unearned fees
assets normally show
debit balances
if a company has overdrawn its bank balances, then
its cash account will show a credit balance
a revenue account
is increased with a credit
a credit to a liability account
indicates an increase in the amount owed to its creditors
in the first month of operations, the total of the debit entries to the cash account amounted to $900 and the total of the credit entries to the cash account amounted to $400. The cash account has a
$500 debit increase
Denton Company showed the following balances at the end of it’s first year:

Cash $7,000
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Common stock 1,400
Dividends 700
Revenues 21,000
Expenses 17,500

What did Denton Company show as total credits on its trial balance?

$29,400
During January 2007, its first month of operation, Dilter Enterprises earned net income of $1,900 and paid dividends to the owners of $500. At January 31, the balance in retained earnings will be
$1,400 credit
During January 2007, Handy Services Inc. paid a cash dividends of $2,000. This transaction
reduces stockholders’ equity by $2,000
At December 1, 2007, Marco Company’s accounts receivable balance was $1,200. During December, Marco had credit sales of $5,000 and collected accounts receivable of $4,000. At December 31, 2007, the accounts receivable balance is
$2,200 debit
At October 1, 2007, Deet Industries had an accounts payable balance of $30,000. During the month, the company made purchases on account of $25,000 and made payments on account of $40,000. At October 31, 2007, the accounts payable balance is
$15,000 credit
In recording accounting transactions, evidence that a transaction has taken place is obtained from
source documents
After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to
ledger accounts
The first step in the recording process is to
analyze the transaction in terms of its effect on the accounts
a journal provides
a chronological record of transactions
Transactions in a journal are initially recorded in
chronological order
The name given to entering transaction data in the journal is
journalizing
Which of the following journal entries is recorded correctly and in the basic format?
Cash 1,500
Wages Expense 550
Advertising Expense 950
When a company has performed a service but has not yet received payment, it
debits accounts receivable and credits revenue from services
A company that receives money in advance of performing a service
debits cash and credits unearned fees
When a company receives a utility bill but will not pay it right away, it should
debit utilities expense and credit accounts payable
An accounting record that includes a list of accounts and their balances at a given time is called a
trial balance
The unearned revenue account is classified as a(n)
liability
Which of the following is an asset?
Prepaid rent
A person who wants to determine the balance of a particular account should refer to the
ledger
The usual ordering of accounts in the general ledger is
assets, liabilities, stockholders’ equity, revenues, and expenses
Management could determine the amounts due from customers by examining which ledger account?
Accounts Receivable
The procedure of transferring journal entries to the ledger accounts is called
posting
A chart of accounts for a business firm
lists the accounts in the ledger
The principle purpose of posting is to
accumulate the effects of journalized transactions in the individual accounts
A trial balance is a listing of
general ledger accounts and balances
Customarily, a trial balance is prepared
at the end of an accounting period

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