Intermediate Accounting Chapter 2 Test Review questions and answers well illustrated.

Intermediate Accounting Chapter 2 Test Review questions and answers well illustrated. Economic Events - correct changes in the financial position of the company. -the first objective of any accounting system to identify External Events - correct ve an exchange between the company and another entity. Ex. (purchasing merchandise inventory for cash, borrowing cash from a bank, paying salaries) Internal Events - correct answers.Directly affect the financial position of the company but doesn't involve an exchange transaction with another entity Ex. (depreciation of equipment use of supplies) Double -entry system - correct effect that each transaction has on the accounting equation General Ledger - correct ction of storage areas, called accounts, used to keep track of increases and decreases in financial position elements. Permanent accounts - correct sents assets, liabilities, and shareholders equity at a point in time Temporary accounts - correct sents changes in the retained earnings component of shareholders equity for a corporation caused by revenue, expense, gain, and loss transactions Source documents - correct invoices, bills from suppliers, and cash register tapes Transaction Analysis - correct process of reviewing the source documents to determine the dual effect on the accounting equation and the specific elements involved (2nd step in processing cycle) Journal - correct des a chronological record of all economic events affecting a firm. (3rd step) Special Journal (Sales Journal) - correct to record a repetitive type of transaction General Journal - correct ds all transactions Posting - correct answers.(Step 4) involves transferring debits and credits recorded in individual journal entries to the specific accounts affected Unadjusted Trial Balance - correct answers.(Step 5) a list of the general ledger accounts, listed in order that they appear in the ledger, along with their balances at a particular date Adjusting Entries - correct answers.(Step 6) recorded at the end of any period when financial statements are prepared Prepaid Expenses - correct the cost of assets acquired in one period and expensed in a future period. Deferred Revenues - correct ed when a company receives cash from a customer in one period for goods or services that are to be provided in a future period Accrued Liabilities - correct ded when an expense has been incurred prior to cash payment Accrued Receivables - correct ve situations when the revenue is recognized in a period prior to the cash receipt Adjusted trial balance - correct answers.(Step 7) apply the adjusted entries Financial Statements - correct answers.(Step 8) Income Statement - correct answers.Summarizes the profit-generating activities of a company that occurred during a particular period Statement of comprehensive Income - correct ts the changes in shareholders equity during the period that were not a result of transactions with owners Comprehensive Income - correct answers.Can be reported in one of two ways: 1- single, continues statement or 2-two separate, but consecutive statements Balance Sheet - correct nts the financial position of the company on a particular date Statement of Cash Flows - correct e statement, reports the events that caused cash to change during the period Statement of Shareholders equity - correct oses the sources of changes in the permanent shareholders equity accounts Closing process - correct answers.(Step 9) Post-Closing Trail balance - correct ies that the closing entries were prepared and posted correctly and that the accounts are now ready for new years transactions Reversing Entries - correct e the effects of some of the adjusting entries recorded at the end of the previous reporting period for the sole purpose of simplifying journal entries Subsidiary ledger - correct ins a group of accounts associated with a particular general ledger control account ASSETS - correct answers.INCRESEES DECREASES ADD Deduct LIABILITIES - correct answers.INCREASES DECREASES Deduct ADD Cash Receipts Journal - correct ds all cash receipts, regardless of the source Contra equity account - correct answers.Is dividends payout Retained Earnings - correct the ceiling to the amount of dividends you can give