Exam 2: Financial Statements and the Accounting System

For each of the following accounts,identify whether a debit or credit yields the indicated change

Paul's Landscaping purchased $500 of office supplies on credit.The company's policy is to initially record prepaid and unearned items in balance sheet accounts.Which of the following general journal entries will Paul's Landscaping make to record this transaction?

Expenses always decrease equity.

The four categories of equity accounts are ________,________,________,and ________.

Drew Castle is an insurance appraiser.Shown below are (a)several accounts in his ledger with each account preceded by an identification number,and (b)several transactions completed by Castle.Indicate the accounts debited and credited when recording each transaction by placing the proper account identification numbers to the right of each transaction. 1.Accounts Payable 8.Office Supplies Expense 2.Accounts Receivable 9.Prepaid Insurance 3.Appraisal Fees Earned 10.Salaries Expense 4.Cash 11.Telephone Expense 5.Insurance Expense 12.Unearned Appraisal Fees 6.Office Equipment 13.Common Stock 7.Office Supplies 14.Dividends

Items such as sales tickets,bank statements,checks,and purchase orders are examples of a business's source documents.

While in the process of posting from the journal to the ledger,a company failed to post a $500 debit to the Equipment account.The effect of this error will be that:

Dividends distributed to stockholders should be treated as an expense of the business.

The heading on every financial statement lists the three W's−Who (the name of the business); What (the name of the statement); and Where (the organization's address).

Identify the statement below that is incorrect.

Identify by marking an X in the appropriate column,whether each of the following items would likely serve as a source document.The first one is done as an example

A ________ is a list of all the accounts used by a company and their identification codes but does not contain the balances.

If a company purchases equipment paying cash,the journal entry to record this transaction will include a debit to Cash.

Identify the accounts that would normally have balances in the debit column of a business's trial balance.

If a company provides services to a customer on credit,the company providing the service should credit Accounts Receivable.

Unearned revenue is classified as a(an)________ on a business's balance sheet.

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

Using the following list of accounts and identification letters A through J for Homer's Management Co.,enter the type of account and its normal balance into the table below.The first item is filled in as an example:

The debt ratio of Company A is .31 and the debt ratio of Company B is .21.Based on this information,an investor can conclude:

Transactions are recorded first in the ledger and then transferred to the journal.