Chapter 2 - The Accounting Cycle: During the Period

Question 1

Accounting cycle

Answer 1

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

Question 2

External transactions

Answer 2

Transactions the firm conducts with a separate economic entity

Question 3

Chart of accounts

Answer 3

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

Question 4

Revenue recognition principle

Answer 4

Companies recognize revenue at the time they provide goods and services to customers

Question 5

Deferred/unearned revenue

Answer 5

Indicates a company has yet to provide services although it has collected the customer’s cash

The company owes the customer a good/service, creating a liability

Question 6

Debit

Answer 6

Left side of an account

Indicates an increase to asset, expense, or dividend accounts, and a decrease to liability, stockholders’ equity, or revenue accounts

Question 7

Credit

Answer 7

Right side of an account

Indicates a decrease to asset, expense, or dividend accounts, and an increase to liability, stockholders’ equity, or revenue accounts

Question 8

How do accountants use the terms debit and credit to describe changes to assets?

Answer 8

Increases in assets are called debits, decreases in assets are called credits

Question 9

DEALOR

Answer 9

Dividends, expenses, assets: increases from debit, decreases from credit

Liabilities, owners’ equity, revenue: decreases from debit, increases from credit

Question 10

General journal

Or journal

Answer 10

A chronological record of all transactions (debits and credits) affecting a firm

Question 11

Posting

Answer 11

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

Question 12

General ledger

Also called a T-account

Answer 12

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

Question 13

Trial balance

Answer 13

A trial balance is a list of all accounts and their balances showing debits equals credits at a certain point in time

A report that lists the balances of all general ledger accounts of a company at a certain point in time

Question 14

Compound journal entry

Answer 14

A journal entry that involves more than two accounts

Any number of accounts can appear in a compound entry, but the sum of the debit amounts always equals the sum of the credit amounts