Chapter 2 - Recording Business Transactions

Question 1

Transaction

Answer 1

Any even that has a financial impact on a business and that can be reliably measured

Question 1

Account

Answer 1

The record of the changes that have occurred in a particular asset, liability, or element of shareholders’ equity during a period

Question 2

Asset Accounts

Answer 2

• Cash
• Accounts Receivable
• Inventory
• Prepaid Expenses
• Land
• Buildings
• Equipment, Furniture, and Fixtures

Question 3

Liability Accounts

Answer 3

• Accounts Payable
• Accrued Liabilities
• Loans Payable

Question 4

Shareholders’ Equity Accounts

Answer 4

• Common Shares
• Retained Earnings
• Dividends
• Revenues
• Expenses

Question 5

Cash

Answer 5

bank account balances, paper currency and coins, undeposited cheques

Question 6

Accounts Receivable

Answer 6

the amt owing from customers who have purchased goods/services but not yet paid

Question 7

Inventory

Answer 7

the goods a company sells to its customers

Question 8

Prepaid Expenses

Answer 8

expenses a company has paid for in advance of actually using the product/service it has purchased

Question 9

Land

Answer 9

Any land a company owns

Question 10

Buildings

Answer 10

office buildings, factories, owned by a company

Question 11

Equipment, Furniture, and Fixtures

Answer 11

office, computer, and manufacturing equipment owned by a company

Question 12

Accounts Payable

Answer 12

the amt a company owes to suppliers who have sold the company goods/services on credit

Question 13

Accrued Liabilities

Answer 13

liability for an expense that has been incurred but not yet billed or paid for

Question 14

Loans Payable

Answer 14

funds a company has borrowed from banks and other creditors to finance its business activities

Question 15

Common Shares

Answer 15

the capital a company has received from its owners in exchange for common shares of the company

Question 16

Dividends

Answer 16

dividends that have been declared during the current fiscal period. Payments to shareholders that rep the distribution of some of the company’s past earnings

Question 17

Revenues

Answer 17

form of income that companies typically earn through the sale of their primary goods/services

Question 18

Expenses

Answer 18

mainly the cosets incurred to purchase the goods/services a company needs to run its business

Question 19

Double - entry system :

Answer 19

An accounting system that uses debits and credits to record the dual effects of each business transaction

Question 20

Chart of accounts :

Answer 20

List of a company’s accounts and their account numbers

Question 21

Journal

Answer 21

The chronological accounting record of an entity’s transactions

Question 22

Journal process :

Answer 22

1. Specify each account affected by the transaction
2. Use the rules of debit and credit to determine whether each account is increased or decreased by the transaction
3. Record the transaction in the journal, including a brief explanation for the entry and the date of transaction. Debit side is entered on the left margin, credit side is indented slightly to the right

Question 23

Ledger :

Answer 23

The book of accounts and their balances

Question 24

Posting

Answer 24

Transferring amounts from the journal to the ledger

Question 25

Trial balance :

Answer 25

A list of all the ledger accounts with their balances