Generally Accepted Accounting Principles and Owners Equity

Powerful Essays
Chapter 7
Accounting Information Systems

Questions

1. What is the right side of an account called? 2. What is the left side of an account called? 3. An organizational scheme used to classify accounts as assets, liabilities, or owners’ equity is known as what? 4. What journal is used to record both the account(s) to be debited and the account(s) to be credited? 5. A collection of specific asset, liability and owners’ equity accounts in known as what? 6. What type of entry is made to adjust the accounts for internal events prior to preparing financial statements? 7. What type of entry is made to close out a temporary account and transfer the balance to retained earnings? 8. What type of account has an opposite balance to the normal balance of its associated account? 9. Recording the appropriate part of a journal entry to the affected account is known as what process? 10. A listing of all general ledger accounts and their respective balances to ensure that debits equal credits is known as what?

Exercises

E7.1 The following events occurred during the first month of business at a local marketing company. Indicate which of the events are accounting events and provide a short justification for your answer.

A. The owner invested money from his savings account for start-up costs. B. Employees hired agree to sign a non-compete agreement. C. The owner pays the first and last month’s rent on office space. D. Computer equipment is purchased on account for each employee. E. Three employees attend the Chamber of Commerce meeting to generate sales contacts. F. A client pays for advertising services performed by the company. G. The office supply store across the street is planning a major advertising promotion next month.

E7.2 Specify in the space provided the effect of each of the following accounting events on assets, liabilities, and owners’ equity. Use I for Increase, D for Decrease,

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