3. Processing accounting information

Question 1

Event

Answer 1

A happening of consequence to an entity.

Question 2

External event:

Answer 2

An event involving interaction between an entity and its environment.

Question 3

Internal event

Answer 3

An event occurring entirely within an entity.

Question 4

Transaction

Answer 4

Any event that is recognized in a set of financial statements.

Question 5

Source document

Answer 5

A piece of paper that is used as evidence to record a transaction.

Question 6

Account

Answer 6

A record used to accumulate amounts for each individual asset, liability, revenue, expense, and component of stockholders’ equity.

Question 7

Chart of accounts

Answer 7

A numerical list of all accounts used by a company.

Question 8

General ledger

Answer 8

A book, a file, a hard drive, or another device containing all of the accounts.

Question 9

T-account

Answer 9

a format of writing out the general ledger. So named because it resembles the capital letter T. The name of the account appears across the horizontal line. One side is used to show increases to that account; the other side, decreases. However, same side is not used for increases for every account.

Question 10

Debit

Answer 10

An entry on the left side of an account, nothing more than this. It is neither good or bad. It is just an entry on the left side. The accounts increased with a debit are the following:
Dividends, Expenses, Assets,
Note: for easier remembering, the first letter of each of these accounts (that are all increased with a debit entry) spell out the word “DEA”.

Question 11

Credit

Answer 11

An entry on the right side of an account, nothing more than this. It is neither good or bad. It is just an entry on the right side. The accounts increased with a debit are the following:
Gains, Income, Revenue, Liabilities, Stockholders’ equity

Note: for easier remembering, the first letter of each of these accounts (that are all increased with a credit entry) spell out the word “GIRLS”

Question 12

Double entry system

Answer 12

A system of accounting in which every transaction is recorded with equal debits and credits and the accounting equation is kept in balance.

Question 13

Journal

Answer 13

A chronological record of transactions.

Question 14

Posting

Answer 14

The process of transferring amounts from a journal to the ledger accounts.

Question 15

Journalizing

Answer 15

The act of recording journal entries.

Question 16

General journal

Answer 16

The journal used in place of a specialized journal

Question 17

Trial balance

Answer 17

A list of each account and its balance; used to prove equality of debits and credits.