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
What makes up total assets?
total assets= cash+ acc. receivable+ equipment
What accounts are an asset?
Notes Receivable
Land
Cash
Prepaid Insurance
Accounts Receivable
Supplies
Equipment
What accounts are a liability?
Unearned revenue
Notes payable
What accounts are expenses?
Legal expense
What accounts are revenue?
Tour service revenue
Services revenue
What are the types of accounts?
Asset
Expense
Revenue
Liability
Equity
What doe normal balance mean?
Accounts with a “debit” normal balance
assets + expenses
Acc. w “credit” normal balance`
Revenue + liability
Expenses always decrease equity so they are always
DEBITS
Examples of assets are
Cash
Acc. Receivable
Office Supplies
Office Equipment
Land
DO assets belong in an income statement?
No, they belong in the balance sheet
Acc. payable is a
Liability
Acc. payable belongs on the income statement (T/F?)
FALSE,
it belongs on the balance sheet
Common stock is an equity acc. and is reported on the
BALANCE SHEET
Dividends are reported on
the statement of retained earnings
Retained earnings represent
cumulative revenues
less: cumulative expenses
less: cumulative dividends
The statement of retained earnings reports…
the change in the retained earnings balance from the beginning of the period to the end of the period.
The balance sheet represents…
The acc. equation
