Chapter 2- The Recording Process Flashcards
The right side of an account
Credit
A system that records in appropriate account the dual effect of each transaction
Double-entry system
A record of increases and decreases in specific asset, liability, or stockholders’ equity items
Account
A journal entry that involves only two accounts
Simple entry
Issued in exchange for the owners’ investment paid in to corporation
Common stock
A distribution by a corporation to it stockholders on a pro rata (equal) basis
Dividend
The entering of transaction data in the journal
Journalizing
The procedure of transferring journal entries to the ledger accounts
Posting
A form with columns for debit, credit, and balance amounts in an account
Three-column form of account
Net income that is kept (retained) in the business
Retained earnings
An accounting record in which transactions are initially recorded in chronological order
Journal
The basic form of an account, consisting of (1) a title, (2) a left or debit side, and (3) a right or credit side
T-account
A list of accounts and account numbers that identify their location in the ledger
Chart of accounts
List of accounts and account numbers used. The numbers identify their specific location in the ledger. No account balances are listed in this
Trial balance
The left side of an account
Debit
A ledger that contains all assets, liabilities, and stockholders’ equity accounts
General ledger
Record of all transactions recorded by the company in chronological order. is where companies record all the transactions or journal entries
General journal
The entire group of accounts maintained by a company
Ledger
A journal entry that involves three or more accounts
Compound entry
An account balance on the side where an increase in the account is recorded
Normal balance
A record of increases and decreases in a specific asset, liability or stockholders equity item.
Account
In order to have a balance journal entry, the total of the debit in the entry must equal the total of the credits in that entry
Debits must equal credits
D E A D
Debits increase Expenses, Assets, and Dividends
Recording process:
Analyze transaction>record in journal>post to ledger
An asset representing the advance payment of cash for an expense to be incurred in the future. It is recorded as an asset because it provides a future benefit to the company.
Prepaid expense
A liability representing the receipt of cash from a customer prior to providing services or selling a good to the customer. This is recorded as a liability because after receiving the payment, the company owes the service or they go to the customer.
Unearned revenue
