Exam 2: Financial Statements and the Accounting System

Indicate on which of the financial statements the following items appears.Use I for income statement,RE for statement of retained earnings,and B for balance sheet.More than one statement may be appropriate for some items.

The right side of an account is called the debit side.

________ is the process of transferring journal entry information from the journal to the ledger.

Explain the recording and posting processes.

A credit is used to record an increase in all of the following accounts except:

The chronological record of each complete transaction that has occurred in a business is called the:

The balances for the accounts of Milo's Management Co.for the year ended December 31 are shown below.Each account shown had a normal balance. Calculate the correct balance for Cash and prepare a trial balance.

Describe the link between a business's income statement,the statement of retained earnings,and the balance sheet.

A company's list of accounts and the identification numbers assigned to each account is called a:

The record of all accounts and their balances used by a business is called a:

Preparation of a trial balance is the first step in processing a financial transaction.

Mary Sunny began business as Sunny Law Firm on November 1.Record the following November transactions by making entries directly to the T-accounts provided.Then,prepare a trial balance,as of November 30. a)Mary invested $15,000 cash and a law library valued at $6,000 in exchange for common stock. b)Purchased $7,500 of office equipment from John Bronx on credit. c)Completed legal work for a client and received $1,500 cash in full payment. d)Paid John Bronx.$3,500 cash in partial settlement of the amount owed. e)Completed $4,000 of legal work for a client on credit. f)The firm paid $2,000 cash in dividends. g)Received $2,500 cash as partial payment for the legal work completed for the client in (e). h)Paid $2,500 cash for the legal secretary's salary.

On January 1 of the current year,Jimmy's Sandwich Company reported stockholders' equity totaling $122,500.During the current year,total revenues were $96,000 while total expenses were $85,500.Also,during the current year paid $20,000 in cash dividends.No other changes in equity occurred during the year.If,on December 31 of the current year,total assets are $196,000,the change in total stockholders' equity during the year was:

Unearned revenues are classified as liabilities.

A company's chart of accounts is a list of all the accounts used and includes an identification number assigned to each account.

A debit is used to record an increase in all of the following accounts except:

A law firm collected $1,800 on account for work performed in the previous month.Which of the following general journal entries will the firm make to record this transaction?

The journal is known as a book of original entry.

Jarrod Automotive,owned and operated by Jarrod Johnson,began business in September of the current year.Jarrod,a mechanic,had no experience with recording business transactions.As a result,Jarrod entered all of September's transactions directly into the ledger accounts.When he tried to locate a particular entry he found it confusing and time consuming.He has hired you to improve his accounting procedures.The accounts in his General Ledger follow: Prepare the general journal entries,in chronological order (a)through (e),from the T-account entries shown.Include a brief description of the probable nature of each transaction.

Stockholder investments always decrease equity.