ACCT Chapter 2 Overview Quiz

Asset Accounts

• Prepaid advertising is classified as an asset.
• Other examples of assets include cash, accounts receivable, supplies, equipment, and land.

Liability Accounts

• Accounts payable is classified as a liability.
• Other types of liabilities include income tax payable, salaries payable, and unearned revenue.

Equity Accounts

• Common stock is classified as an equity account.
• Other components of equity include dividends, revenues, and expenses.

Debits and Credits

• A credit appears on the right side of an account, while a debit appears on the left side.
• Debits are used to increase assets, expenses, and dividend accounts.
• Credits are used to increase liabilities, revenue, and common stock accounts.

Double-Entry Accounting

• Each transaction must impact at least two accounts, ensuring that total debits equal total credits.
• This principle guarantees that the accounting equation remains balanced.

Journalizing

• The process of recording transactions in a journal is called journalizing.

Trial Balance

• The trial balance is prepared to ensure that debits and credits are equal in the general ledger.
• It acts as a tool to visualize the balance of accounts but is not a financial statement.
• The trial balance does not calculate net income and is prepared before financial statements.

Increasing Accounts

• To increase:
  • Cash: Debit
  • Accounts Payable: Credit
  • Supplies: Debit
  • Accounts Receivable: Debit

Additional Account Changes

• To increase:
  • Common Stock: Credit
  • Professional Fees Earned: Credit
  • Dividends: Debit
  • Salaries Expense: Debit

These points encapsulate fundamental accounting concepts essential for understanding how transactions impact financial statements.

Test your knowledge of asset, liability, and equity accounts with this quiz based on Chapter 2 of your accounting course. Each question will challenge you to identify the correct category for various accounts. Perfect for review before exams!