Chapter 2- The Recording Process

Question 0

Debit

Answer 0

Left side of an account
Debit balance if left > than right
Debits increase assets and decrease liabilities
Asset accounts normally show debit balances
Debits to assets should exceed credits

Question 1

Account

Answer 1

Individual accounting record of increases and decreases in assets liabilities and OE items 
T-ACCOUNT 
1) title 
2) left (debit) side 
3) right (credit) side

Question 2

Credit

Answer 2

Right side of an account
Credit balance if right side > than left
Credits decrease assets and increase liabilities
Liability accounts normally show credit balances
Credits to liabilities should exceed debits

Question 3

Owners capital account

Answer 3

Debits
—-increase owners capital

Credits
—-decrease owners capital

Normal balance is credit

Question 4

Owners drawings account

Answer 4

Debits
—-increase drawings

Credits
—-decrease drawings

Normal balance is debit

Decreases OE but is not on the income statement

Question 5

Revenues account

Answer 5

Debits
—-increase

Credits
—-decrease

Normal balance is credit

Question 6

Expense account

Answer 6

Debit
—-increased by debits

Credit
—-decreased

Normal balance is debit

Question 7

Steps in the recording process

Answer 7

1) analyze each transaction for effects on accounts
2) enter transactions into journal
3) transfer journal information to ledger

Question 8

Journal

Answer 8

“Book of original entry”

Shows debit and credit effects on specific accounts

Question 9

General journal

Answer 9

Most basic journal

Contributions to accounting

1) discloses complete effects of transaction
2) provides chronological record of transactions
3) helps prevent errors/ locate errors

Question 10

Ledger

Answer 10

Entire group of accounts maintained by a company

Question 11

General ledger

Answer 11

All asset, liability and OE accounts

Question 12

Posting

Answer 12

Transferring journal entries to ledger accounts

Question 13

Trial balance

Answer 13

List of accounts and their balances at a given time

• proves mathematical equality of debits and credits after posting
• includes assets, liabilities, OE, revenue, and expenses