Exam 2: The Accounting Information System

A company in the process of liquidation is considered to be under the going concern assumption.

Match the following principles with their correct definition. a.Comparability g.Historical cost b.Conservatism h.Matching c.Double-entry accounting i.Monetary unit d.Economic entity j.Revenue recognition e.Going concern k.Time period f.Full disclosure -This assumption states that each company will be accounted for separately from its owners.

All of the following are external events except

Income statement accounts have normal credit balances.

____________________ is the capacity of information to make a difference in a decision by helping make timely predictions or provide timely feedback.

Match the following terms with their correct definition. a.Account f.Debit b.Accounting cycle g.Event c.Chart of accounts h.General ledger d.Cost vs. benefit i.Journal e.Credit j.Trial balance -Something that happens to the business that may or may not require a journal entry.

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.) a.Cash b.Accounts receivable c.Supplies d.Prepaid insurance e.Land f.Equipment g.Accounts payable h.Unearned revenues i.Notes payable j.Common stock k.Retained earnings l.Service revenue m.Salary expense n.Insurance expense o.Utilities expense p.Dividends -Borrowing cash

Which of the following statements is true?

Select the choice that describes the type of transaction and whether it should be recorded in the accounting system. (Choices may be used more than once.) a.External event to be recorded as a transaction b.Internal event to be recorded as a transaction c.Event which should not be recognized in the accounting system -Cash sales are made.

____________________ is the quality of accounting information that allows a user to compare two or more accounting periods for a single company.

Information that is material means that an error in recording the dollar amount of a transaction would

The issuance of common stock increases both ____________________ and stockholders' equity.

Only events that can be measured with sufficient reliability will be recognized in the accounting system.

For each transaction provided, choose the appropriate account from the list that would receive a debit entry as a result of the transaction. (Choices may be used more than once.) a.Cash b.Accounts receivable c.Supplies d.Prepaid insurance e.Land f.Equipment g.Accounts payable h.Unearned revenues i.Notes payable j.Common stock k.Retained earnings l.Service revenue m.Salary expense n.Insurance expense o.Utilities expense p.Dividends -Paying utilities

Payment is made for machinery purchases previously on credit. What effect does this transaction have on the accounting equation?

The concept that assumes that assets are recorded at the amount to acquire them is called the ____________________ principle.

Which of the following best describes one effect of recognizing expenses incurred by a business entity?

Debit entries are used to

The payment of a dividend increases both cash and stockholders' equity of the distributing entity.

Select the choice that describes the type of transaction and whether it should be recorded in the accounting system. (Choices may be used more than once.) a.External event to be recorded as a transaction b.Internal event to be recorded as a transaction c.Event which should not be recognized in the accounting system -An order is placed with a supplier for merchandise.