Chapter 2 - Accounting For Business Transactions

Question 1

5 Steps in Processing Transactions

Answer 1

1. Identify
2. Analyze
3. Record
4. Post
5. Prepare

Question 2

Source documents

Answer 2

Identify and describe transactions and events. Can either be hard copy or electronic. Objective and reliable evidence.

Ex:
Receipts
Checks
Bank statements

Question 3

Account

Answer 3

The record of increase and decrease in a specific asset, liability, equity, revenue, or expense.

Question 4

General ledger

Answer 4

A record of ALL the accounts USED by a company.

Question 5

Asset Accounts

Answer 5

1. Cash
2. Accounts Receivable
3. Note Receivable
4. Prepaid Accounts
5. Supplies
6. Equipment
7. Building
8. Land

Question 6

Prepaid - Keyword for?

Answer 6

Asset account

Question 7

Receivable - Keyword for?

Answer 7

Asset account

Question 8

Payable - Keyword for?

Answer 8

Liability account

Question 9

Unearned - Keyword for?

Answer 9

Liability account

Question 10

Debit

Answer 10

INCREASES on the LEFT side

Question 11

Credit

Answer 11

INCREASES on the RIGHT side

Question 12

6 Common Categories

Answer 12

1. Assets
2. Liabilities
3. Stockholders Equity
4. Dividends
5. Revenue
6. Expenses

Question 13

What two accounts are equity accounts?

Answer 13

1. Stockholders equity

2. Retained Earnings

Question 14

Normal balance

Answer 14

The increasing side of an account

Question 15

Normal Balance of Debit

Answer 15

Accounts that INCREASE on the LEFT

Question 16

ADE

Answer 16

Accounts with a normal balance of DEBIT

A - Asset
D - Dividends
E - Expenses

Question 17

RSL

Answer 17

Accounts with normal balance of CREDIT

R - Revenue
S - Stockholders Equity
L - Liability

Question 18

Journal

Answer 18

Gives a complete record of EACH TRANSACTION in one place. Shows debits and credits for each transaction.

Question 19

Posting

Answer 19

Process of transferring journal entry information to the ledger.

Question 20

Trial balance

Answer 20

A list of all ledger accounts and their balances at a point in time.

Question 21

Steps to prepare a trial balance

Answer 21

1. List each account and it’s amount
2. Compute the total of debit balances and credit balances
3. Verify total debit balances equal total credit balances