Exam 2: The Accounting Information System

For a company's reported financial information to be useful, what four qualities must be present? Explain these four qualities.

Two friends decide to launch a new business by investing $25,000 each in Hot Spot Tanning. They are given shares of stock as evidence of their ownership interest. What effect does this transaction have on the accounting equation?

The ___________________ is a chronological record of all transactions entered into by a business.

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 -Issuing common stock

The telephone bill for the current period is received and recorded, but payment will be made later. What effect does this transaction have on the accounting equation?

A trial balance is the listing of each active account and its corresponding debit or credit balance at a particular point in time.

Several accounts from the financial records of Wynn Linders, Inc. are listed. Indicate its normal balance and the debit/credit rules for increasing the account. (Choices may be used more than once.) a.Debit b.Credit -Dividends

Heart & Hands Clinic began business as a corporation in 2013. Several transactions which occurred early in 2013 are described below. Record each transaction in proper journal form, excluding written explanations.

Several accounts from the financial records of Wynn Linders, Inc. are listed. Indicate its normal balance and the debit/credit rules for increasing the account. (Choices may be used more than once.) a.Debit b.Credit -Intangibles

The payment of salaries to employees will result in a debit to an expense account and a credit to the ___________ account.

The issuance of common stock increases a company's assets and stockholders' equity.

A chart of accounts is prepared to determine whether the books have gotten out of balance.

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 -Materials are entered onto the assembly line.

____________________ is the quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences.

The going concern assumption infers that a company will continue to operate into the future.

The going concern assumption is concerned with

The concept that assumes that an entity is not in the process of bankruptcy is called the ___________ concept.

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 -Term used to refer to the left side of an account.

A revenue account has a normal ___________ balance.

A debit entry increases assets and revenue accounts.