Exam 3: The Accounting Cycle: Capturing Economic Events

Revenues increase equity and are, therefore, recorded by crediting the revenues account.

The reason that both expenses and dividends are recorded by debit entries is that:

In accounting, the terms debit and credit indicate, respectively:

The recognition principle indicates that revenue usually should be recognized and recorded in the accounting records:

Ben Dryden, president of Jet Glass Limited, noticed a $8,000 debit to Accounts Payable in the company's general ledger. This debit could correspond to:

The following transactions occurred during May, the first month of operations for Hunter Products Limited: * Issued 50,000 shares of share capital to the owners of the corporation in exchange for $600,000 cash * Purchased a piece of land for $400,000, making a $150,000 cash down payment and signing a note payable for the balance. * Made a $60,000 cash payment on the note payable from the purchase of land. * Purchased equipment on credit from BBW Limited for $63,000. -Refer to the above data. What is the balance in the Cash account at the end of May?

Double-entry accounting The accounting system of most businesses, whether manual or computer-based, is some form of a double-entry system of accounting. (A.) What is meant by the term "double-entry accounting"? (B.) Explain how the double-entry system is applied in accounting for the following transaction: Majestic Company purchases a piece of equipment costing $6,000, paying $3,000 cash with the balance of the purchase price to be paid within 60 days.

The bookkeeper for Wood Mfg. made the following journal entry on January 30, 2009: Land 201,500 Building . 84,500 Cash 65,000 Notes Payable 221,000 -Refer to the above data. Before the journal entry above, Wood had assets, liabilities, and equity of $450,000, $100,000, and $350,000, respectively. What are total assets immediately after the above transaction occurs?

If your trial balance has a higher debit balance than credit balance, it signifies:

Montauk Oil Co. reports these account balances at December 31, 2010 Accounts Payable \ 110,000 Land \ 200,000 Notes Payable \ 260,000 Equipment \ 160,000 Cash \ 80,000 Accounts Receivable \ 100,000 Buildings \ 240,000 Share Capital \ 340,000 Retained Earnings \ 70,000 On January 2, 2011, Montauk Oil collected $50,000 of its accounts receivable and paid $20,000 of its accounts payable. -Refer to the above data. On January 3, 2011, total liabilities are:

The journal entry to record a particular business transaction includes a credit to a liability account. This transaction is most likely also to include:

What type of account will normally contain a debit balance?

The bookkeeper for Wood Mfg. made the following journal entry on January 30, 2009: Land 201,500 Building . 84,500 Cash 65,000 Notes Payable 221,000 -Refer to the above data. This transaction involves: