Chapter 2 Flashcards
External Events
exchanges between company and separate economic entity
internal events
affect financial position of company but don’t involve an exchange
Retained Earnings Formula
Net Income- Distributions to share holders
Retained earnings
(increase/ deacreased)
+revenues
+gains
-expenses
-losses
-dividends
Journal
A chronological record of all economic events affecting financial position
Transaction Analysis
Process of reviewing source documents to determine dual effect on the accounting equation
Journal Entry
Captures the effect of a transaction on financial position in debit/credit form
Posting
Transferring debits and credits recorded in individual journal entries to the specific accounts affected
Ledger
Collection of accounts that organizes the accounts and allows for keeping track of increases and decreases and resulting balances
Adjusting Entries
record changes in
-assets and liabilities
-related revenues and expenses
trial balance
All accounts and their balances at a particular date.
djusting entries. Adjusting entries can be classified into three types:
(1) prepayments,
(2) accruals, and
(3) estimates.
the purpose of the statement of shareholders’ equity
Disclose investments by owners, distributions to owners, net income, and other comprehensive income.
Temporary accounts
-revenues/ expenses
-gains/ losses
-dividends
The double entry system of accounting means each transaction
Multiple choice question.
has a dual effect on the accounting equation
