Questions - Principles of Accounting, Volume 1: Financial Accounting

1.

LO 3.1Explain what conservatism means, and give an example in your own words.

2.

LO 3.2State the accounting equation, and explain what each part represents.

3.

LO 3.2How do revenues and expenses affect the accounting equation?

4.

LO 3.2Does every transaction affect both sides of the accounting equation? Explain your answer.

5.

LO 3.3Which is the “book of original entry”?

6.

LO 3.4What is the effect on the accounting equation when a business purchases supplies on account?

7.

LO 3.4What is the effect on the accounting equation when a business pays the balance due on accounts payable?

8.

LO 3.4Is it still necessary to record a transaction if it has no net effect on the accounting equation? Explain your answer.

9.

LO 3.4Why does the combined total of the company’s liabilities and equity always equal the total of the company’s assets?

10.

LO 3.5What do the terms “debit” and “credit” mean?

11.

LO 3.5Will an accounts receivable balance increase with a debit or a credit entry? How do you know?

12.

LO 3.5What types of accounts will increase with a credit?

13.

LO 3.5What is a journal?

14.

LO 3.5Why is a journal referred to as the “book of original entry”?

15.

LO 3.5What does the term recognize mean?

16.

LO 3.5What are the rules you should follow when recording journal entries?

17.

LO 3.5What is the general ledger?

18.

LO 3.5Explain the steps in posting.

19.

LO 3.5What is a T-account? When would we use T-accounts?

20.

LO 3.5Explain normal balances. Give three examples of accounts that will normally have a debit balance and three accounts that will normally have a credit balance.

21.

LO 3.5What is a prepaid account? What type of account is it?

22.

LO 3.5What is an unearned account? What type of account is it?

23.

LO 3.5Explain what a T-account is and what purpose it serves.

24.

LO 3.5Can a credit entry be described as a generally positive or negative transaction? Explain.

25.

LO 3.5What types of accounts are increased with a debit?

26.

LO 3.5What types of accounts are increased with a credit?

27.

LO 3.5What does an account’s “normal balance” indicate?

28.

LO 3.5Does the order in which financial statements are prepared matter?

29.

LO 3.5Answer the following questions about the trial balance: What is the purpose of it? What is the primary usefulness of it?