Chapter 2: The Account

Question 1

What is double entry accounting?

Answer 1

A system that record the dual (two-sided) effect of each transaction in appropriate accounts

Question 2

What are the 9 steps to the accounting cycle?

Answer 2

1) Analyze business transactions

2) Journalize the transactions

3) Post to the ledger accounts

4) Prepare a trial balance

5) Journalize and post adjusting entries

6) Prepare an adjuster trial balance

7) Prepare financial statements

8) Journalize and post closing entries

9) Prepare a post-closing trial balance

Question 3

What is the journal?

Answer 3

An accounting record where transactions are receded in chronological (date) order. It shows the debit and credit effect of each transaction on specific accounts

Question 4

How does the journal contribute to the the recording process?

Answer 4

• Discloses the complete effect of a transaction in one place
• Provides a chronological record of transactions
• Helps to prevent and locate errors because debit and credit amounts for each entry can easily be compared

Question 5

What is journalizing?

Answer 5

The entering of transaction data in the journal

Question 6

What does a complete journal entry consist of?

Answer 6

1) Date of transaction

2) Accounts and amounts to be debited and credited

3) Brief explanation of the transaction

Question 7

What is a compound entry?

Answer 7

A journal entry that affects three or more accounts

Question 8

When should a transaction be recorded?

Answer 8

It should be recorded only if it causes the financial position of the entity to change. It must have a monetary impact on the business

Question 9

What is the ledger and what does it provide?

Answer 9

The entire group of accounts maintained by a company. It provides the balance in each of the accounts and keeps track of changes in these balances

Question 10

What is the general ledger?

Answer 10

Contains accounts for all the asset, liability, equity, revenue, and expense accounts

Question 11

What is posting?

Answer 11

The process of transferring journal entries to the ledger accounts

Question 12

What is the chart of accounts?

Answer 12

A list of the accounts and account numbers that identify where the accounts are in the ledger

Assets - 1000
Liabilities - 2000
Owner’s Equity - 3000
Revenue - 4000
Expenses - 5000

Question 13

What is the trial balance?

Answer 13

A list of the accounts and their balance at the end of an accounting period