Accounting Book #2

Question 1

Asset

Answer 1

Anything of value owned by a business.

Question 2

Equities

Answer 2

Claims against the business assets.

Question 3

Creditor

Answer 3

Anyone to whom a business owes money.

Question 4

Liability

Answer 4

Any amount of money owed to a creditor.

Question 5

Capital

Answer 5

The net worth of a business to its owners after all debts are paid.

Question 6

Basic Accounting Equation

Answer 6

Assets= Liabilities + Capital.

Question 7

Transaction

Answer 7

An action that changes the value of the assets, liabilities, and capital of a business entity.

Question 8

Account

Answer 8

A record that summarizes all the characteristics of a single item of the equation.

Question 9

Account Title

Answer 9

The name given to any account.

Question 10

Account Balance

Answer 10

The computed balance of an account after all debits and credits have been paid.

Question 11

Chart of Accounts

Answer 11

A list of all accounts used by an entity indicating the identifying number, the account title and classification of each accounting equation item.

Question 12

Balance Sheet

Answer 12

A form that shows the financial position of a business on a specific date.

Question 13

Liquidity

Answer 13

ease of converting an item to cash

Question 14

Adequate disclosure

Answer 14

To provide all necessary information on the financial statements of a business so a reader an determine the financial condition of that business.

Question 15

Business Transaction

Answer 15

Every time a business transaction takes place, changes are made within the accounting equation. Every business transaction changes at east two different accounts in the equation.

Question 16

Going concern

Answer 16

Every financial report is prepared as if the business will exist forever.

Question 17

Objective evidence

Answer 17

Providing a document that supports a business transaction before it is recorded in the accounting system.

Question 18

Units of measurement

Answer 18

Applying a value to a business transaction that is represented by a common unit of measurement. I. e dollars and cents in the U.S

Question 19

Journal

Answer 19

a business form used for recording accounting information in chronological order

Question 20

Entry

Answer 20

a transaction recorded in a journal

Question 21

Book of Original Entry

Answer 21

any journal used in an accounting system

Question 22

Book of Secondary Entry

Answer 22

any ledger used in an accounting system

Question 23

Source Document

Answer 23

a document that provides the necessary information to make a journal entry

Question 24

Journalizing

Answer 24

recording information in chronological order in the journal, using the source document as evidence of the business transaction

Question 25

Debit

Answer 25

refers to any entry made in the left-hand amount column of a general journal

Question 26

Credit

Answer 26

refers to any entry made in the right-hand amount column of a general journal

Question 27

Ledger

Answer 27

a group of accounts

Question 28

Owners Equity (capital)

Answer 28

the financial l interest of the owner of a business; determined by subtracting total liabilities from total assets

Question 29

Beginning Balance Sheet

Answer 29

a balance sheet prepared on the day the business starts.

Question 30

General Ledger

Answer 30

contains all the accounts needed to prepare financial statements.

Question 31

Opening an Account

Answer 31

writing the account name and number as the heading for the account.

Question 32

Posting

Answer 32

the process of transferring the information from a journal entry to the ledger accounts