Chapter+3+Sol+Q+BE+DOIT

Chapter+3+Sol+Q+BE+DOIT - Chapter 3 Questions, Brief...

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Chapter 3 Questions, Brief Exercises, Just DOIT solutions ANSWERS TO QUESTIONS 1. The system of collecting and processing transaction data and communicating financial information to decision makers is known as the accounting information system. 2. Yes, a business can enter into a transaction in which only the left side of the accounting equation is affected. An example would be a transaction where an increase in one asset is offset by a decrease in another asset. An increase in the equipment account which is offset by a decrease in the cash account is a specific example. 3. Accounting transactions are the economic events of the company recorded by accountants because they affect the basic accounting equation. (a) The death of a major stockholder of the company is not an accounting transaction as it does not affect the basic accounting equation. (b) Supplies purchased on account is an accounting transaction because it affects the basic accounting equation. (c) An employee being fired is not an accounting transaction as it does not affect the basic accounting equation. (d) Paying a cash dividend to stockholders is an accounting transaction as it does affect the basic accounting equation. 4. (a) Decrease assets and decrease stockholders’ equity. (b) Increase assets and decrease assets. (c) Increase assets and increase stockholders’ equity. (d) Decrease assets and decrease liabilities. 5. An account consists of three parts: (a) the title, (b) the left or debit side, and (c) the right or credit side. Because the alignment of these parts resembles the letter T, it is referred to as a T account. 6. Disagree. The terms debit and credit are synonymous with left and right, respectively. 7. James is incorrect. The double-entry system merely records the dual (two-sided) effect of a transaction on the accounting equation. A transaction is not recorded twice; it is recorded once, and must affect two or more accounts to keep the basic accounting equation in balance. In other words, for each transaction, debits must equal credits. 8. Gayle is incorrect. A debit balance only means that debit amounts exceed credit amounts in an account. Conversely, a credit balance only means that credit amounts
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are greater than debit amounts in an account. Thus, a debit or credit balance is neither favorable or unfavorable. 9. (a) Asset accounts are increased by debits and decreased by credits. (b) Liability accounts are decreased by debits and increased by credits. (c) The common stock account is decreased by debits and increased by credits.
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Questions Chapter 3 (Continued) 10. (a) Accounts Receivable—debit balance. (b) Cash—debit balance. (c) Dividends—debit balance. (d) Accounts Payable—credit balance. (e)
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Chapter+3+Sol+Q+BE+DOIT - Chapter 3 Questions, Brief...

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