Chapter 2 Flashcards
What is an account?
accumulates detailed information regrading the increase and decrease in a specific asset, liability or equity item
what is a ledger?
a place where accounts are maintained, also called a book
what is an asset?
a resource that has future economic benefits for a business. they are used to generate revenue during the day to day operations of the business.
what are some examples of asset accounts?
cash, accounts receivable, notes recievable, supplies, merchandise inventory, prepaid insurance, prepaid rent, land and buildings
what are some examples of liabilty accounts?
accounts payable, wages payable, short term notes payable, long term notes payable and unearned revenues
what is equity?
the net assets owned by a business.
what are the different types of equity accounts?
share capital, retained earnings, revenue, and expenses
how is an increase in liabilty recorded?
an increase is a CREDIT and a decrease is a DEBIT
how is an increase in assets recorded?
an increase is a DEBIT and a decrease is a CREDIT
How is an increase in equity recorded as?
an increase is a CREDIT and a decrease is a DEBIT
what is a chart of accounts?
a list of accounts where each account is assigned both a name and a number
what is double entry accounting?
each transaction is recorded in at least two accounts where the total debits always equal the total credits.
what is a trial balance?
an internal document that lists all the account balances at a point in time.
