Chapter 2 Flashcards
General Ledger
Collection of all accounts with their activity and balances that exist in a business
A journal
A book of original entry that includes a chronological record of all transactions that have occurred within a business during a period occured
A trial balance
a list of all ledger accounts which exist in a business and includes an identification number assigned to each account
tool to check equality of debits and credits in ledger
Which accounts would have a normal debit balance?
Expenses
Dividends
Cash
Debits go on the
Left
Credits go on the
right
3 steps of preparing trial balance
- list each acc. title and its amount (from the ledger) in the trial balance
- Compute the total of debit balances and the total of credit balances
- Verify total debit balances= total credit balances
Acc. that would have a normal credit balance
common stock
acc. payable
revenues
unearned revenues
If investing $ into business for common stock, in a T-acc
debit cash
credit common stock
Acc. that have a normal debit balance?
Expenses
Dividends
Cash
Formula for debt ratio
debt ratio= total liabilities/total assets
Which financial statements report the financial position of a business over a period of time?
statement of returned earnings
statement of cash floes
income statement
A report period…
Common types:
Annual (aka accounting/fiscal year)
Semiannual
Quarterly
Monthly period
A business whose acc year begins on Jan 1 and ends Dec 31 are called
calendar year companies
Debt ratio is
debt ratio= total liabilities/total assets
What does debit mean in acc?
An entry recorded for a payment made or owed
What does credit mean in acc?
An entry that records a decrease in assets or an increase in liability as well as a decrease in expenses or an increase in revenue
Equation for ending cash balance
beginning cash balance+ debits - credits= ending cash balance
Equation for ending acc receivable balance
beg. acc receivable bal + credit sales(debits)- cusomer payments (credits)= ending acc receivable
What’s the formula for acc receivable balance
beg. acc receivable bal. + services on acc- collections from customers= end. acc. receivable bal.
What’s the equation for Ending Acc. payable balance
Beg. acc. payable bal. + purchases on acc.- payments on acc.= end. acc. payable balance
ending total equity equation
beg. total equity+ revenues-expenses= ending total equity
Change in equity equation
beg. total equity- ending total equity = change in equity
net income equation
net income= total revenues- total expenses
