Exam 2: Analyzing and Recording Transactions

The purchase of supplies on credit should be recorded with a debit to Supplies and a credit to Accounts Payable.

An account balance is the difference between the debits and credits for an account including any beginning balance.

_________________ identify and describe transactions and events and provide objective evidence and amounts for recording.

The debt ratio is calculated by dividing total assets by total liabilities.

Which of the following statements is incorrect?

When a company bills a customer for $600 for services rendered, the journal entry to record this transaction will include a $600 debit to Services Revenue.

In a double-entry accounting system, the total amount debited must always equal the total amount credited.

____________________________ and _____________________ are the starting points for the analyzing and recording process.

Debits increase asset and expense accounts.

An income statement reports the revenues earned less expenses incurred by a business over a period of time.

Explain how accounts are used in recording information about transactions.

Items such as sales tickets, bank statements, checks, and purchase orders are source documents.

A list of all accounts and the identification number assigned to each account used by a company is called a:

A ledger is:

The general journal provides a place for recording all of the following except:

The _______________________ is a record containing all accounts used by a company.

___________________ are promises of payment from customers to sellers.

Credits always increase account balances.

Increases in assets are _______________ to asset accounts, increases in liabilities are _______________ to liability accounts.

Explain the debt ratio and its use in analyzing a company's financial condition.