Chapter 2 Key Words

Question 1

Full set of procedures used to accomplish the measurement/communication process of financial accounting

Answer 1

accounting cycle

Question 2

Transactions the firm conducts with a separate economic entity.

Answer 2

external transactions

Question 3

A record of the business activities related to a particular item

Answer 3

account

Question 4

A list of all account names used to record transactions of a company

Answer 4

chart of accounts

Question 5

Accounting Equation

Answer 5

A = L + SE

Question 6

Record revenue in the period in which we provide goods and services to customers for the amount the company is entitled to receive

Answer 6

revenue recognition principle

Question 7

Left side of an account. Indicates an increase to asset, expense, or dividend accounts, and a decrease to liability, stockholders’ equity, or revenue accounts

Answer 7

debit

Question 8

Right side of an account. Indicates a decrease to asset, expense, or dividend accounts, and an increase to liability, stockholders’ equity, or revenue accounts.

Answer 8

credit

Question 9

A chronological record of all transactions affecting a firm.

Answer 9

journal

Question 10

The format used for recording business transactions.

Answer 10

journal entry

Question 11

The process of transferring the debit and credit information from the journal to individual accounts in the general ledger.

Answer 11

posting

Question 12

A collection of each account with its individual transactions and resulting account balance.

Answer 12

general ledger

Question 13

A list of all accounts and their balances at a particular date, showing that total debits equal total credits

Answer 13

trial balance

Question 14

6 steps in measuring external transactions

Answer 14

Use source documents to identify accounts affected by an external transaction
Analyze the impact of the transaction on the accounting equation
Assess whether the transaction results in a debit or credit to account balances
Record the transaction in a journal using debits and credits
Post the transaction to the general ledger
Prepare a trial balance

Question 15

Assets - Debits/Credit

Answer 15

Increase/decrease

Question 16

Liabilities - Debits/Credit

Answer 16

decrease/increase

Question 17

stockholders’ equity - Debits/Credit

Answer 17

decrease/increase

Question 18

common stock - Debits/Credit

Answer 18

decrease/increase

Question 19

retained earnings - Debits/Credit

Answer 19

decrease/increase

Question 20

revenues - Debits/Credit

Answer 20

decrease/increase

Question 21

expenses - Debits/Credit

Answer 21

increase/decrease

Question 22

dividends - Debits/Credit

Answer 22

increase/decrease