Chapter 2 Financial Accounting Flashcards
Transactions
Any event that impacts the financial position of a business
Where are amounts posted?
To the Ledger
What are 3 examples of common liability accounts?
Accounts Payable
Notes Payable
Accrued Liabilities
Expenses
Costs of operating a business
What are 3 examples of debits?
Assets
Dividends
Expenses
What are 2 other names for common stock
Capital stock
Paid in Capital
Accrued Liabilities
Expenses that have not been paid
What must always happen in a journal entry?
Debits must equal credits
What does every transaction have?
A debit and a credit
What are 4 examples of Equity Accounts?
Common Stock
Retained Earnings
Revenue
Expenses
What are 9 examples of common asset accounts?
Cash Accounts Receivable Notes Receivable Inventory Prepaid expenses Land Buildings Equipment Furniture and Fixtures
What are the 2 reasons why prepaid expenses are assets?
Has the prefix pre which means before
Provides a future benefit
Debit increases in what 3 things? (ADE)
Assets
Dividends
Expenses
Posting
Transferring information from the journal to the ledger
Revenues
Earned by providing goods or services
What are revenues not?
Cash
Double-entry accounting
Each transaction affects at least 2 accounts
Prepaid expenses
Expenses paid for in advance
What kind of industry does not have inventory?
Service Based Industries
The Account
Record of all changes in a particular asset, liability or equity
What are the 2 sides of a transaction?
Business gives something
Business receives something
What are expenses not?
Cash
What 2 terms are neutral
Debit
Credit
What are 2 examples of cash?
Credit Card
Debit Card
The Journal
Chronological records of transactions
What are three steps to journaling?
- Identify accounts impacted by transaction
- Apply debit / credit rules for the increase or decrease in the accounts
- Record transactions in journal
Where are transactions recorded?
In Journal
Credit increases in what 3 things?
Liabilities
Revenue
Common Stock
Retained Earnings
Inventory
Products held for sale
