CH 2: Acct for Business Transactions Flashcards
Steps of the accounting process
1-identify transactions & source docs
2- analyze transactions using acct eq.
3- record journal entry
4- post entry to ledger
the process of recording transactions in a journal
Journalizing
Source documents (definition and examples)
documents that identify/describe transactions in an acct system
Yes
-sales receipts
-checks
-purchase orders
-bills from suppliers
-payroll records
-bank statements
-bills (telephone bill)
what is an “account”
Record of increases/decreases in a specific asset, liability, equity, revenue, or expense
what is the “ledger”
Record of all accounts and their balances for an acct. system
What are the asset accounts
-cash
-acc receivable
-supplies
-land
-notes receivable
-equipment
inventory
-prepaid
-buildings
what are liability accounts
-acct payable
-notes payable
-unearned revenue
-accured liability
what are the equity accounts
-common stock
-dividends
-revnue
-expenses
acct equation
assets= L + E
cash
a companies cash balance
acct receivable
promises of payment from customers
notes receivable
held by a lender- a borrowers promise to pay the lender a specific amount of money
prepaid asset
assets that arise from prepayment of future expenses
accounts payable
held by a buyer- a buyers promise to pay later
notes payable
held by a borrower-a written promissory note to pay later at a future date
unearned revenue
when a customer pays in advance for products/services-liability to be settled int he future when goods/services are delivered
accrued liability
amounts owed that are not yet paid
ex- wages payable, taxes payable
equity
an owners claim on company assets
common stock
when an owner invests in the company in exchange for stock
-inc both assets & equity
dividends
distribution of assets to owners
-when dividends are paid out, dec both assets and equity
revenue acct
amts received from sales of goods/services to customers
-increases equity
expense accts
costs of providing goods/services
-decreases equity
chart of accounts
list of all ledger accounts with an identification number to each account
what are the numbers for chart of accounts
assets~101-199
Liabilities~200-299
equity~ 300-399
revenue~ 400-499
Expense~ 500-599
debit vs credit vs zero balance
Debit Balance- Debits> Credits
Credit Balance- Debits<Credits
Zero balance- Debits=Credits
left vs right side
left-debit
right-credit
double entry accounting rules
1- at least 2 accounts involved
2- total amt debited = total amt credited
Normal balances for each account
assets- debit
dividends-debit
expenses-debit
liabilities-credit
revenue-credit
common stock- credit
to decrease/increase the normal acct
increase- add to normal acct
decrease-add to opposite account
general journal
where you record each transaction
how to find the ending balance of t accounts
1- use the normal balance side adn add everything up
2-subtract everything from the other side
3-list balance on normal balance side
what do you always enter first in the general journal
debits before credits
when creating the trial balance- what numbers do we input
the balance after all adjustments and what not- think of T-accts normal balance
balance sheets are organized in how many catagories
3
liability is an obligation of
the company to transfer assets to others
what does a trial balance include
assets, liabilities, equity (perm accts)
income statement posting time
month ended
income statement
revenues-expenses
statement of retained earnings posting time
for month ended
