Chapter 2: The Recording Process Flashcards
1
Q
Double Entry System
A
- Each Transaction must affect two or more accounts
- DEBITS must equal CREDITS
- Recording is done by debiting at least on account and crediting another
2
Q
DEBIT Balance
A
Debit Amount > Credit Amounts
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3
Q
CREDIT Balance
A
Debit Amount < Credit Amount
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4
Q
Equity Relationships
A
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5
Q
The Journal
A
“Grundbuch”
- Book of original entry
- Transaction recorded in chronological order
6
Q
The Ledger
A
- General Ledgers contains the entire group of accounts maintained by a company
- arranged in financial statement order
7
Q
Posting
A
Process of transferring aomunts from the Journal to the Ledger accounts
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8
Q
Chart of Accounts
A
List of Account and Account numbers in the sequence in which they are presented in the financial statments
- Listing of the accounts and the account number that identify their location in the ledger
9
Q
Steps in Recording Process
A
- Analyze each transaction
- Enter Transaction in a journal
- Transfer journal information to ledger accounts
10
Q
Journalizing
A
Enterin a transaction data into the journal
11
Q
Trial Balance
A
- A list of accounts and their balances at a given point in time
- Primary purpose is to prove that the debits total equal the credits total after posting
12
Q
Currency Signs
A
- Do not appear in a journal or ledger
- Appear in financial statment and trial balance
13
Q
Limitations of a Trial Balance
A
It does not guarantee freedom from recording errors
A Trial Balance can balance even when
- a transaction is not journalized
- a correct journal entry is not posted
- a journal entry is posted twice
- incorrect accounts are used in journalizing/posting
- offsetting errors are made in recording amount of a transaction