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Chapter 2 - The Accounting Cycle: During the Period
Chapter 2
The Accounting Cycle: During the Period
REVIEW QUESTIONS
Question 2-1 (LO 2-1)
Question 2-2 (LO 2-1)
1. Use source documents to identify accounts affected by external transactions.
Question 2-3 (LO 2-2)
Dual effect refers to each transaction having an effect on at least two accounts of the accounting
Question 2-4 (LO 2-2)
Assets
=
Liabilities
+
Stockholders’ equity
(a)
Increase
=
Increase
+
No change
Question 2-5 (LO 2-2)
Jerry is not correct. While it is possible for a transaction to increase one account and decrease
Chapter 2 - The Accounting Cycle: During the Period
Answers to Review Questions (continued)
Question 2-6 (LO 2-3)
Accounts
Normal balance
Assets
Debit
Question 2-7 (LO 2-3)
Jenny is not correct. Any account can be debited or credited. Since an asset has a normal debit
Question 2-8 (LO 2-3)
Accounts
Increase
(a) Cash
Debit
Question 2-9 (LO 2-3)
Accounts
Decrease*
(a) Cash
Credit
Chapter 2 - The Accounting Cycle: During the Period
Answers to Review Questions (continued)
Question 2-10 (LO 2-3)
Question 2-11 (LO 2-4)
Question 2-12 (LO 2-4)
Question 2-13 (LO 2-4)
Question 2-14 (LO 2-4)
(a)
Debit
Credit
Cash
1,200
Service Revenue
1,200
Date
Debit
Credit
Chapter 2 - The Accounting Cycle: During the Period
Answers to Review Questions (continued)
Question 2-15 (LO 2-4)
Question 2-16 (LO 2-5)
Question 2-17 (LO 2-5)
Posting is the process of transferring the debit and credit information from the journal to
individual accounts in the general ledger.
(a)
Supplies
Cash
Question 2-18 (LO 2-6)
Question 2-19 (LO 2-6)
Question 2-20 (LO 2-6)
Not necessarily. While total debits equaling total credits is a good indication that all accounts
Chapter 2 - The Accounting Cycle: During the Period
BRIEF EXERCISES
Brief Exercise 2-1 (LO 2-1)
Proper order:
(c) Use source documents to identify accounts affected by external
Brief Exercise 2-2 (LO 2-2)
Assets
=
Liabilities
+
Stockholders’ Equity
Possible
(Yes/No)
Brief Exercise 2-3 (LO 2-2)
Total Assets
Total Liabilities and
Stockholders’ Equity
Cash
$ 7,200
Accounts Payable
$ 1,700
Chapter 2 - The Accounting Cycle: During the Period
Brief Exercise 2-4 (LO 2-2)
Assets
=
Liabilities
+
Stockholders’ Equity
Brief Exercise 2-5 (LO 2-3)
Account
Debit
Credit
Asset
+
−
Chapter 2 - The Accounting Cycle: During the Period
Brief Exercise 2-6 (LO 2-3)
Brief Exercise 2-7 (LO 2-4)
(a)
Debit
Credit
Chapter 2 - The Accounting Cycle: During the Period
Brief Exercise 2-8 (LO 2-4)
(a)
Debit
Credit
Brief Exercise 2-9 (LO 2-5)
1.
Cash
13,000
8,200
2. Postings on the left side (or debit side) of the cash T-account represent increases to
3. Postings on the right side (or credit side) of the cash T-account represent decreases
Chapter 2 - The Accounting Cycle: During the Period
Brief Exercise 2-10 (LO 2-2, 2-3, 2-4, 2-5)
Assets
=
Liabilities
+
Stockholders’
Equity
(a)
Debit
Credit
(b)
(c)
Cash
Service Revenue
Chapter 2 - The Accounting Cycle: During the Period
Brief Exercise 2-11 (LO 2-6)
Trial Balance
Accounts
Debit
Credit
Cash
$ 6,100
Brief Exercise 2-12 (LO 2-6)
Trial Balance
Accounts
Debit
Credit
Cash
$ 7,300
Chapter 2 - The Accounting Cycle: During the Period
EXERCISES
Exercise 2-1 (LO 2-1)
1.
d.
Exercise 2-2 (LO 2-2)
Assets
=
Liabilities
+
Stockholders’ Equity
1.
Increase
=
No effect
+
Increase
Exercise 2-3 (LO 2-2)
Dual Effect
1. Issue 10,000 shares of common stock
Assets
Stockholders’
Exercise 2-4 (LO 2-2)
Dual Effect
1. Paint houses in the current month for
Assets
Stockholders’
Exercise 2-5 (LO 2-2)
Transaction
Balance
Retained earnings, April 1
$13,000
Exercise 2-6 (LO 2-3)
Debit or Credit
Account
1.
Debit
Cash
Chapter 2 - The Accounting Cycle: During the Period
Exercise 2-7 (LO 2-3)
Account
Debited
Account
Credited
Example: Purchase equipment in exchange for cash.
Equipment
Cash
Exercise 2-8 (LO 2-4)
(1)
Debit
Credit
(2)
(3)
(4)
(5)
Exercise 2-9 (LO 2-4)
Exercise 2-10 (LO 2-4)
February 2
Debit
Credit
February 7
February 14
Chapter 2 - The Accounting Cycle: During the Period
Exercise 2-11 (LO 2-4)
March 1
Debit
Credit
Cash
21,000
March 5
Cash
9,000
March 10
March 15
March 22
March 27
Exercise 2-12 (LO 2-4)
Corrections
External Transaction
Accounts
Debit
Credit
Accounts in black need no correction.
