Chapter 2

Question 1

Account

Answer 1

Individual accounting record of increases and decreases in a specific asset, liability or equity item.

Question 2

T-account

Answer 2

Visual representation of all accounts
Title
Debit
Credit

Question 3

Debit

Answer 3

Left side
Increases in assets, expenses, dividends
Decreases liabilities

Question 4

Credit

Answer 4

Right side
Decreases in assets
Increases in liabilities, equity, revenue

Question 5

Debit balance

Answer 5

D > C
Shown by assets account

Question 6

Credit balance

Answer 6

C > D
Shown by liability account

Question 7

Revenue entry

Answer 7

Debit accounts receivable, credit sales revenue

Question 8

Expense entry

Answer 8

Debit expense account, credit cash

Question 9

Journal

Answer 9

Book of original entry
Records transactions chronologically and helps prevent errors
It includes: date, debit and credit amounts, explanation of transaction

Question 10

Simple entry vs Compound entry

Answer 10

Simple entry: only 2 accounts affected
Compound entry: more than 3 accounts affected

Question 11

Ledger

Answer 11

Entire group of T-accounts
An organised version of the journal

Question 12

Posting

Answer 12

Procedure of transferring journal entries to ledger accounts

Question 13

Trial Balance

Answer 13

List of accounts and their balances
Proves mathematical equality of debits and credits

Question 14

Limitations of the trial balance

Answer 14

A trial balance may balance even if
- a transaction isn’t journalised
- a journal entry is posted twice