CHAPTER 2 Flashcards
What accounts belong under assets?
Cash
Accounts receivable
Inventory
Prepaid expenses
Land
Buildings
Equipment, furniture, fixtures
What is an asset?
A resource that provides a future benefit for a business
What accounts belong under liabilities?
Accounts payable
Accrued liabilities
Loans payable
What is an Accrued liability?
An expense not yet paid for
What are loans payable?
Owing borrowed money
What accounts belong under Shareholders Equity?
Share capital / Common shares
Retained earnings
Dividends
Revenues
Expenses
What are dividends?
Payments to shareholders that decrease retained earnings
What does the income statement report?
Revenues, Expenses and Income
What does the balance sheet list?
Assets, Liabilities and Shareholders equity at the end of a period
What is the Chart of accounts?
A list of the names of accounts with their unique account numbers
If an accountant is unsure which account to use, what should they do?
Consult the Chart of Accounts
In T-accounts, what is held on the right?
Credit
In T-accounts, what is held on the left?
Debit
What is a Double-Entry system?
A system that records transactions on credit and debit.
What does Shareholders Equity equal?
Share capital
+Opening retained earnings
-Dividends
+(revenues-expenses)
What do you use when recording an increase in Assets?
Debit
What do you use when recording a decrease in Assets?
Credit
What do you use when recording an increase in Liabilities or Shareholders Equity?
Credit
What do you use when recording a decrease in Liabilities or Shareholders Equity?
Debit
When making journal entries, what are the steps?
Which accounts were affected by the transaction
Are they increasing or decreasing? (Debit or Credit)
Record transaction in journal
What is Posting?
Transfer of information from the Journal to the Ledger
What does a trial balance list?
All of a business’s ledger accounts and balances
In what order are the Trial Balances components listed?
Asset accounts
Liability accounts
Accounts that affect Shareholders equity
