Chapter 2 Flashcards
What is an account?
-A detailed record of all increases and decreases that have occurred in an individual asset, liability, or equity during a specified period
Stockholders’ equity: List the four equity accounts.
-Common stock, dividends, revenues, expenses
What is a chart of accounts?
-Lists all company accounts along with the account numbers
What is a ledger?
-The record holding all accounts of a business, the changes in those accounts, and their balances
What is double-entry accounting?
-A system of accounting in which every transaction affects at least two accounts
Draw a T-account and label the debit and credit side.
-Debit is the left side, Credit is on the right
Fill in the normal balance of the account: Asset Debit Expenses Dividends Liabilities Revenues
- DEALER
- Dividends, Expenses, Assets have a normal debit balance
- Liabilities, Equity, Revenues have a normal credit balance
Determining the balance in the following T-account:
Cash 25,000 l 1,000 2,000 l 3,000
-BAL: $23,000 (Debit)
Source documents
-Provides the evidence and data for recording transactions
Journal
-A record of the transactions in date order
Posting
-Transferring data from the journal to the ledger
What are the steps for journalizing and posting?
- Step 1: Identify the accounts and the account type
- Step 2: Decide whether each account increases or decreases, then apply rules of debits and credits
- Step 3: Record the transaction in the journal
- Step 4: Post the journal entry to the ledger
- Step 5: Determine whether the accounting equation is in balance
What is a trial balance?
-A list of all ledger accounts with their balances at a point in time
Write the formula for the debt ratio.
-Debt Ratio=Total Liabilities/Total Assets
What does the debt ratio show?
-Shows the proportion of assets financed with debt
