Accounting 301 Chapter 3 Questions

Front 1

What describes the classification and normal balance of the Dividends account?

Back 1

Stockholders equity account with a debit balance

Front 2

What is Goodwill?

Back 2

An intangible asset that arises when a buyer acquires an existing business.

Goodwill represents assets that are not separately identifiable.

Front 3

If Nation’s Best Chocolate recorded journal entries for the declaration of $150,000 of dividends, a $96,000 increase in accounts receivable for services rendered, and the purchase of equipment for $63,000, then the net effect of these entries on stockholders' equity would be

Back 3

a decrease of $54,000.

( Paying dividends would decrease equity by $150,000 and increasing accounts receivable would increase equity by $96,000 for the revenue earned. Equipment purchases would have no effect on equity. Therefore, stockholders' equity would decrease by $54,000 ($150,000 -$96,000).)

Front 4

What is the relationship between the entries in the general journal and the general ledger?

Back 4

The general ledger contains transactions posted from entries in the general journal.

Front 5

The owner of a store selling used CDs wants one account that summarizes all sales to customers and another that summarizes all purchases from individuals. What should the owner use for each purpose?

Back 5

a special journal

Front 6

Event

Back 6

A happening of consequence, which generally is the source or cause of changes in assets, liabilities, and equity. Events may be external or internal.

Front 7

Transaction

Back 7

An external event involving a transfer or exchange between two or more entities.

Front 8

Account

Back 8

A systematic arrangement that shows the effect of transactions and other events on a specific element (asset, liability, and so on). Companies keep a separate account for each asset, liability, revenue, and expense, and for capital (stockholders' equity).

Front 9

Real account

Back 9

Asset, liability, and equity accounts; these accounts appear on the balance sheet. Companies do not close real accounts, also called permanent accounts.

Front 10

Nominal Account

Back 10

Revenue, expense, and dividend accounts; except for dividends, these accounts appear on the income statement. Companies close nominal accounts, also called temporary accounts, at the end of the accounting period.

Front 11

Ledger

Back 11

The book (or computer printouts) containing the accounts. A general ledger is a collection of all of the asset, liability, owners' (stockholders') equity, revenue, and expense accounts. A subsidiary ledger contains the details related to a given general ledger account.

Front 12

Journal

Back 12

The “book of original entry” where the company initially records transactions and selected other events. The company transfers that information from the journal to the ledger.

Front 13

Posting

Back 13

The process of transferring the essential facts and figures from the book of original entry (the journal) to the ledger accounts, using debits and credits made to accounts.

Front 14

Trial balance

Back 14

The list of all open accounts, in the sequence in which they appear in the ledger, and their balances. Companies may prepare a trial balance at any time, though they usually do so at the end of an accounting period. The trial balance proves the mathematical equality of debits and credits after posting and also uncovers errors in journalizing and posting.

Front 15

Adjusting Entries

Back 15

Adjustments made at the end of the accounting period to ensure that a company has recorded revenues in the period in which it satisfies the performance obligation and recognized expenses in the period in which it incurs them—in other words, that it has followed the revenue recognition and expense recognition principles. Companies often prepare adjustments after the balance sheet date but date the entries as of the balance sheet date.

Front 16

Financial Statements

Back 16

The principal means through which a company communicates its financial information. These statements reflect the collection, tabulation, and final summarization of the accounting data. The statements most frequently provided are (1) the balance sheet, (2) the income statement, (3) the statement of cash flows, and (4) the statement of owners' or stockholders' equity. Note disclosures are an integral part of a company's financial statements.

Front 17

Closing Entries

Back 17

Journal entries made at the end of a company's annual accounting period to transfer the balances of temporary accounts to a permanent owners' equity account (retained earnings or a capital account, depending on the company's form of organization).

Front 18

How would it effect the Accounting equation if you declared a dividend of $5,000?

Back 18

+5,000 to liabilities

-5,000 to Stockholders' equity

Front 19

What are "real" accounts?

Back 19

Also known as permanent accounts -

assets, liabilities, and equities.

Front 20

What are temp accounts?

Back 20

Also known as nominal accounts

Revenue, expenses, and dividends.

Front 21

What accounts do you debit?

Back 21

D - Debit

E - Expense

A - Assets

D - Dividends.

Front 22

What accounts do you credit?

Back 22

C - Credit

U - Unearned Service Revenue

R - Revenue

L - Liabilites

S - Stockholders' Equity

Front 23

What are deferrals?

Back 23

Prepaid Expenses or Unearned Revenues.

Front 24

How will the date be listed on the Balance Sheet?

Back 24

A single day: Example:

October 31st, 2014
December 31st, 2019

Front 25

How will the date be listed on the Income Statement?

Back 25

For the ____ Ended _____

Example:

For the Month Ended October 31st, 2014

For the Year ended December 31st, 2017

Front 26

What is the journal entry for Bad Debts?

Back 26

Bad Debt Expense xx

Allowance for Doubtful Accounts xx

Front 27

How will the date be listed on the Adjust trial balance?

Back 27

A single day:

Example:

October 31st, 2014

December 31st, 2019