Chapter 2

Question 1

What is an account?

Answer 1

A cumulation of detailed information regarding increases and decreases in a specific asset, liability or equity item

Question 2

What are some examples of asset accounts?

Answer 2

Cash, Accounts Receivable, Unused Supplies, Inventory, Prepaid Insurance or Rent, Buildings, Land

Question 3

What are some examples of liability accounts?

Answer 3

Accounts payable, Bank loans, Unearned revenue

Question 4

What are the 5 types of shareholder’s equity accounts?

Answer 4

Share capital, Retained earnings, Dividends, Revenue, Expenses

Question 5

What is a T account? What is on each side of this account?

Answer 5

A simplified account used to show increases and decreases in an account.
The left side indicates debits and the right side indicated credits

Question 6

For dividends, expenses and assets (DEA) debits are _______ and credits are _______

Answer 6

Debits = increase
Credits = decrease

Question 7

For liabilities, equity and revenue (LER) debits are ______ and credits are _______

Answer 7

Debits = decrease
Credits = increase

Question 8

How do you determine an account balance?

Answer 8

The adding and subtracting of increases and decreases in an account. The balance is recorded on whichever side of the T account is greater

Question 9

What is a normal balance? Give an example

Answer 9

The side of the T account where increases occur.
Example: Accounts Payable (a liability) will have an increase on the right side

Question 10

What is a chart of accounts?

Answer 10

A created list of accounts. Each account is assigned (usually) both a name and a number

Question 11

In the double-entry accounting, the sum of ____ balance accounts in the ledger must ____ the sum of the credit balance accounts

Answer 11

The sum of the DEBIT balance accounts must EQUAL the sum of the credit balance accounts

Question 12

Assets (_____) = Liabilities (______) + Equity (Credits)

Answer 12

Assets (DEBITS) = Liabilities (CREDITS) + Equity (Credits)

Question 13

What is a trial balance? When is it used?

Answer 13

A trial balance lists all the account balances at a point in time. It is used to verify that the accounting equation (debit & credits) is balanced.

Question 14

Financial transactions are recorded in a _______ ______.

Answer 14

General Journal

Question 15

What is a general journal? What is it also known as?

Answer 15

A document used to chronologically records a business’ debit & credit transactions.
AKA The book of original entry

Question 16

________ is the process of recording a financial transaction in the journal

Answer 16

Journalizing

Question 17

What is a journal entry?

Answer 17

The resulting debit & credit entry completed by journalizing

Question 18

________ entry is when a journal entry has more than one debit or credit for that transaction.

Answer 18

Compound Entry

Question 19

In journaling, accounts to be ____ are recorded first, followed by accounts to be _____

Answer 19

Accounts to be DEBITED are recorded first, followed by the accounts to be CREDITED

Question 20

What is a ledger account? Where are they kept?

Answer 20

A formal variation of the T account.
They are kept in the general ledger

Question 21

The Accounting Cycle is:
General Journal —> General ______ —> _____ Balance —> Statements

Answer 21

General Journal - General Ledger - Trial Balance - Statements