Chapter 2: The Balance Sheet

B) consistent with those used by other companies.

C) linked to account numbers.

D) the names mandated for use by the FASB.

Answer: C

Difficulty: 2 Medium

LO: 02-02

Topic: Step 1: Analyze Transactions

Blooms: Remember

AACSB: Analytic

AICPA BB: Resource Management

AICPA FN: Reporting

Feedback: As part of transaction analysis, a name is given to each item exchanged. Accountants refer to these names as account titles (or names). To ensure account titles are used consistently, every company establishes a chart of accounts a list that designates a name and reference number that the company will use when accounting for each item it exchanges. The chart of accounts is tailored to each company’s business, so although some account titles are common across all companies, others may be unique to a particular company.

[QUESTION]

41. Every transaction:

A) increases one account and decreases another account.

B) has at least two effects on the basic accounting equation.

C) affects only balance sheet accounts or only income statement accounts.

D) is analyzed from the standpoint of the business owners.

Answer: B

Difficulty: 3 Hard

LO: 02-02

Topic: Step 1: Analyze Transactions

Blooms: Understand

AACSB: Analytic

AICPA BB: Critical Thinking

AICPA FN: Reporting

Feedback: Every transaction has at least two effects on the basic accounting equation (at least one debit and one credit). A transaction can result in two accounts increasing, two accounts decreasing, or one account increasing and one account decreasing. A transaction may affect two balance sheet accounts, two income statement accounts, or one of each. Every transaction is analyzed from the standpoint of the business, not the owners.

[QUESTION]

42. The Buddy Burger Corporation owes $1.5 million to the Texas Wholesale Meat Company

Financial Accounting, 5e

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