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ACG 2021- Chapter 2 Review Questions and Correct Answers
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  • ACG 2021

A(n) __________________ is any event that has a financial impact on a business and can be measured reliably. Transaction What two things must happen for an event to be considered a transaction? It gives something It receives something in return. An account is the record of all the changes in an ...

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  • August 11, 2024
  • 6
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • acg 2021 chapter 2 review questions and correct a
  • an is any event that has a fi
  • what two things must happen for an event to be con

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  • ACG 2021
  • ACG 2021

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ACG 2021- Chapter 2 Review Questions
and Correct Answers
A(n) __________________ is any event that has a financial impact on a business and
can be measured reliably. ✅Transaction

What two things must happen for an event to be considered a transaction? ✅It gives
something

It receives something in return.

An account is the record of all the changes in an asset, liability or stockholders' equity
during a period. TRUE or FALSE ✅True

What is the definition of an asset? ✅An economic resource that provides a future
benefit for a business

List seven asset accounts that a company is likely to have. ✅current
- Cash
- Accounts receivable
- Notes receivable
- inventory (eg. supplies)
- Prepaid expenses

both
- Investments (short=current and long= long term)

long term
- Property, Plant and Equipment

What is the definition of a liability? ✅Liabilities are debt. Amounts owed to other parties
(payables).

List the three most common types of liabilities ✅Accounts payable
Notes payable (borrowings)
Accrued liabilities

What is stockholders' equity? Formula? ✅The owners' claims to the assets of a
corporation

Stockholder's Equity= Assets-Liabilities

What five main types of accounts are in stockholders' equity? ✅Common stock

, Retained earnings
Dividends
Revenues
Expenses

Every transaction of the business affects its financial statements. TRUE or FALSE
✅True

When "on account" is used, is the impact of the transaction negative or positive? ✅the
impact is positive
- for example, buying $3,000 of supplies on account will be +$3,000 in assets (debt in T
chart) and +3,000 in liabilities (credit in T chart)

What effect do revenues have on stockholders' equity? What effect do expenses have
on stockholders' equity? ✅- Revenues increase stockholders' equity.

- Expenses decrease stockholders' equity.

What effect does a dividend declaration have on retained earnings? ✅Dividends
decrease retained earnings

Fill in the equation for the statement of retained earnings: ✅Beginning retained
earnings+ Net income- Dividends= Ending retained earnings

or

change in RE= net income- dividends

What line item is carried from the Income Statement to the Statement of Retained
Earnings? What line item is carried from the Statement of Retained Earnings to the
Balance Sheet? ✅a) Net income

b) Ending retained earnings

Describe how accounting is based on a double-entry system? ✅The dual effects of
each transaction are always recorded. Every transaction affects at least two accounts.

How does the letter T represent an account? ✅The vertical line in the T splits the
account into two halves. The account title appears on the top of the T.

The left side of each T-account is the ____________ side, and the right side is the
____________ side. ✅Debit; credit

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