Exam 2: Analyzing and Reporting Transactions

If an account was incorrectly debited for $300 instead of correctly credited for $300,the account is out of balance by $300.

If a company sells products and receives from the customer a formal written promise to pay a definite sum of money on demand or on a defined future date (or dates),the seller should debit the promised amount to Accounts Receivable.

Unearned revenues are assets,because a service or product is owed to the customer.

An account used to record the owner's investments in the business plus any more or less permanent changes in the equity is called a(n):

A transaction that increases an asset account and decreases a liability account must also affect another account.

The _____________ consists of the steps repeated each reporting period for the purpose of preparing financial statements for users.

A credit purchase of a business expense item should be recorded with a debit to an expense account and a credit to Accounts Payable.

If an error is discovered in either the journal or the ledger,it must be corrected by erasing the incorrect amount and entering the corrected amount.

The following are all of the accounts of Vita Mix Company that have a balance at the end of August,the company's first month of operation: All accounts have normal balances. (A)Calculate net income. (B)Calculate the amount of equity to be shown on the August 31 balance sheet.

To credit an expense account means to decrease it.

Debits increase asset and expense accounts.

The first step in the accounting cycle is transaction analysis.

An account balance is:

The account sometimes referred to as the owner's personal account or drawing account is called a(n):

Because they decrease equity,withdrawals made by a business owner are credited to his/her withdrawals account.

When a business sends a bill for $200 to a customer for services rendered,the journal entry to record this transaction will include a $200 credit to Accounts Receivable.

Jay Smith's Word Processing began business and completed these transactions during the month of November: (a)Purchased office supplies on account,$75. (b)Completed work for a publisher on credit,$500. (c)Paid for the office supplies purchased in Transaction a. (d)Completed work for a resume writing service and received $85 cash. (e)Received $500 for the work described in Transaction b. Prepare journal entries to record the above transactions.Include a brief description for each entry.

To make it easier for the bookkeeper,the cost of land is separated from the cost of buildings located on the land.

When a company sells services for which cash will not be received until some future date,the company should credit an unearned revenues account for the amount charged to the customer.

Explain debits and credits and their role in the accounting system.