CH 2 Flashcards
2) Describe two external transactions.
a. Selling products
b. Purchasing supplies
1) What are two measurement roles in financial accounting?
a. Measure business activities
b. Communicate measurements to external parties
3) Describe two internal transactions
a. Using supplies
b. Earning revenues after receiving cash.
4) What are six steps of measuring external transactions
a. Use source documents to identify accounts( external transactions).
b. Analyze the impact of the transaction( balance sheet)
c. Assess whether the transaction results in a debt or credit
d. Record the transaction
e. Post the transaction to the “T-account” in the general ledger.
f. Prepare a trail balance
5) What are source documents?
a. Identify the date and nature of each transaction, participating parties, and the monetary term.
i. Sales invoices
ii. Bills suppliers
iii. Signed contracts
6) Is an account, an summary of the effects of all transactions related to an item over a period of time?
Yes
7) Asset accounts are cash, supplies, and accounts payable?
a. No, all except for accounts payable.
8) Is unearned revenue (advance payment from customers) a liability?
Yes
9) When using T accounts, when do the rules of credits and debit reverse?
a. The rules reverse when an account’s transaction decreases.
i. Cash payment would be a credit.
ii. Liabilities payment is a debt.
10) Is a debt to an expense is an increase to retain earnings in an account?
a. No, decrease retain earnings.
11) Do we increase OE’s account with debits?
a. No credits increase OE.
i. Retain earnings increase from increase in credits, but earnings can decrease from expenses and dividends (if debt increases).
i. Debts increase trickles to retain earnings which debits decrease.
When repaying borrowed money, do you credit cash or business expenses?
a. You credit money because expenses are used to created profit
13) How do you record debits and credits?
a. With a journal
i. Journal is a chronological record of all transactions of a firm.
14) Is this statement true: Sentences required a noun and verb, so accounting records require debits and credits
True
15) What is a general ledger?
a. Is defined as company’s accounts are recorded by all transactions.
