Chapter 2 Flashcards
(38 cards)
the detailed record of all increases and decreases that have occurred in an account during a specified period.
An account
Asset Accounts
Cash
Accounts Receivable
Notes Receivable
Prepaid Expense
Land
Building
Equipment, Furniture, and Fixtures
A written promise that a customer will pay a fixed amount of money (principal) and interest by a certain date in the future.
Notes Receivable
A customer’s promise to pay in the future for services or good sold.
Accounts Receivable.
Often described as “On Account”.
A payment of an expense in advance.
Prepaid Expense
It is considered an asset
because the prepayment provides a benefit in the future. Examples of
prepaid expenses are Prepaid Rent, Prepaid Insurance, and Office
Supplies.
Liability Accounts
Accounts Payable
Notes Payable
Accrued Liability
Unearned Revenue
A promise made by the business to pay a debt in the
future. Arises from a credit purchase
Accounts Payable
A written promise made by the business to pay a debt,
usually involving interest, in the future
Notes Payable
An amount owed but not paid.
Accrued Liability
A specific type of payable
such as Taxes Payable, Rent Payable, and Salaries
Payable
Occurs when a company receives cash from a customer
but has not provided the product or service. The
promise to provide services or deliver goods in the
future.
Unearned Revenue
Equity Accounts
Common Stock
Dividends
Revenues
Expenses
Represents the net contributions of the
stockholders in the business. Increases equity.
Common Stock
Distributions of cash or other assets to the stockholders.
Decreases equity.
Dividends
Earnings that result from delivering goods or services to
customers. Increases equity.
Revenues
Examples include Service
Revenue and Rent Revenue
The cost of selling goods or services
Expenses
Examples include Rent Expense, Salaries
Expense, and Utilities Expense.
A ____ is used
to organize a
company’s
accounts.
A chart of accounts
a
record holding all
the accounts of a
business, the
changes in those
accounts, and
their balances.
ledger
Transactions always involve at least two accounts.
double-entry system
Accounting uses the double-entry system to record the dual effects of each transaction.
For example, office supplies are purchased for cash requiring an increase in Office Supplies and a decrease in Cash.
A shortened form of the ledger
T-account
left side if called debit.
right size is called credit
cash (<- account name) ------------------------------- debit (dr) | credit (cr)
All accounts are summarized on one side of the T-account, called the _____
normal balance
An account’s normal balance appears on the increase side of the account.
Assets increase with a debit, so the normal balance is a debit.
Liabilities and equity increase with a credit, so the normal balance is a credit.
All Elephants Do Love Rowdy Children
Assets
Expenses
Dividends have normal debit balances
Liabilities
Revenues
Common stock all have normal credit balances.
Transactions are recorded in a _____, the record of the transactions in date order
journal
The data from the journal is then transferred to the ledger, a process called ____.
posting
A ____ is a list of all ledger accounts with their balances at a point in time.
trial balance
The asset accounts are listed first, followed by liabilities, and then equity
