Ch 2 & 3 Flashcards

1
Q

What is a business transaction

A

Any financial event that changes the resources of a firm

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2
Q

An owner’s financial interest is called…

A

Equity or capital

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3
Q

Accounts Payable is money a firm will…

A

…Owe to creditors

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4
Q

Accounts Receivable is money that is…

A

…owed to the firm.

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5
Q

The property that a business owns is called an

A

Asset

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6
Q

Any debt or obligation of a business is called a

A

Liability

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7
Q

What is a balance sheet?

A

The status of a firm’s assets, liabilities, and the owner’s equity.

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8
Q

What is the fundamental accounting equation?

A

Assets = Liabilities + Owner’s Equity

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9
Q

The inflow of money is called revenue. What is the outflow called?

A

Expense

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10
Q

A salary expense is written as a debit or a credit?

A

Debit

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11
Q

Withdrawals are funds taken from the business by the owner for personal use. They are not an expense. What are they?

A

A decrease in the owner’s equity.

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12
Q

What function does an income statement serve?

A

Shows the results of business operations for a specific period of time such as a month, quarter, or year.

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13
Q

What is on an income statement?

A

Revenue earned and expenses of doing business

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14
Q

Most business decisions are influenced by what type of statement?

A

Financial statement

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15
Q

What is the purpose of a T account?

A

To analyze transactions

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16
Q

What side of a T account is Debit?

A

Debit is always on the left. Credit is on the right.

17
Q

Is prepaid rent an asset or an expense

A

An asset

18
Q

When an asset increases, do you record it as a debit or a credit?

A

Debit

19
Q

When a liability increases, do you record it as a debit or a credit?

A

Credit

20
Q

How is revenue increased?

A

Cash payments and accounts receivable

21
Q

Expenses decrease the owner’s equity. Which side of the T account do you record expenses?

A

The LEFT side. Debit.

22
Q

Accountants do not use the terms “left or right side”. The correct term is what for the sides?

A

Debit and credit

23
Q

A statement that tests the accuracy of total debits and credits after transactions have been recorded is called what?

A

Trial Balance

24
Q

What is a chart of accounts?

A

List of all accounts used by a business

25
Q

Accounts that continue with a balance on the balance sheet at the end of an accounting period and move into the next period are called what?

A

Permanent accounts

26
Q

What are accounts called that do NOT move forward into the next period?

A

Temporary or nominal accounts.

27
Q

What two accounts appear on an income statement?

A

Revenue and expense

28
Q

Which of these accounts is not a liability?
Accounts Payable, Equity, Supplies

A

Supplies

29
Q

Which of these accounts is not an asset?
Accounts Receivable, Revenue, Cash

A

Revenue