Exam 3: The Accounting Information System

Source documents can provide evidence that a transaction has occurred.

Revenue increases stockholders' equity and should be recorded whenever cash is received from customers.

Some of the following errors would cause the debit and credit columns of the trial balance to have unequal totals. For each of the four cases, state whether the error would cause unequal totals in the trial balance. If the error causes unequal totals, indicate the amount of difference between the columns and state whether the debit or credit is larger. Each case is to be considered independently of the others. 1. A payment of $700 to a creditor was recorded by a debit to Accounts Payable of $70 and a credit to Cash of $700. 2. A $340 payment for a printer was recorded by a debit to Equipment of $34 and a credit to Cash for $34. 3. An account receivable in the amount of $2,000 was collected in full. The collection was recorded by a debit to Cash for $2,000 and a debit to Accounts Payable for $2,000. 4. An account payable was paid by issuing a check for $800. The payment was recorded by debiting Accounts Payable $800 and crediting Accounts Receivable $800.

Budke Corporation paid dividends of $5,000. As a result of this event, the

The tabular analysis of transactions for Baxter Company is presented below. Instructions Prepare a retained earnings statement for August and a classified balance sheet at August 31, 2014.

A list of accounts and their balances at a given time is called a(n)

At September 1, 2014, Baxter Inc. reported Retained Earnings of $282,000. During the month, Baxter generated revenues of $40,000, incurred expenses of $24,000, purchased equipment for $10,000 and paid dividends of $4,000. What is the balance in Retained Earnings at September 30, 2014?

Posting is performed by transferring information from the

Financing activities include the purchase or sale of long-lived assets or the purchase or sale of investment securities.

An investment by the stockholders in a business increases

Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transactions. 1. Received $50,000 from stockholders. 2. Purchased equipment for $75,000, paying $15,000 in cash and giving a note payable for the remainder. 3. Paid $3,000 rent for the month. 4. Recorded $12,500 of services provided on account. 5. Paid wages of $9,500. 6. Received $7,000 in cash for services provided. 7. Collected $2,000 from customers on account.

Management could determine the amounts due from customers by examining which ledger account?

The accounts in the ledger of Dependable Delivery Service contain the following balances on July 31, 2014. Accounts Receivable \ 16,400 Prepaid Insurance \ 1,800 Accounts Payable 12,400 Maintenance and Repairs Expense 1,200 Cash ? Service Revenue 13,500 Equipment 59,360 Dividends 800 Gasoline Expense 950 Common Stock 50,000 Insurance Expense 600 Salaries and Wages Expense 6,400 Notes Payable, due 2017 28,450 Salaries and Wages Payable 900 Retained Earnings 5,200 (July 1, 2014) Instructions Prepare a trial balance with the accounts arranged as illustrated in the chapter, and fill in the missing amount for Cash.

Which of the following errors, each considered individually, would cause the trial balance to be out of balance?

Which of the following items has no effect on retained earnings?

Which statement is incorrect?

Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n)

Which statement is incorrect?

Which of the following is not true of the terms debit and credit?

Analyze the following transactions in terms of their effect on the basic accounting equation. Record each transaction by increasing (+) or decreasing (-) the dollar amount of each item affected. Indicate the new balance of each item after a transaction is recorded. (1) Issued stock to investors for $20,000 in cash. (2) Purchased supplies on credit for $700. (3) Billed customers $1,000 for services provided. (4) Paid for supplies purchased in transaction 2. (5) Paid dividends of $300 cash to stockholders. (6) Received half from customers billed in transaction 3. (7) Received and paid utility bill for $100.