Chapter 2 Vocabulary

Question 1

account receivable

Answer 1

A claim against the customer created by selling merchandise or services on credit.

Question 2

assets

Answer 2

The resources owned by a business.

Question 3

balance of the account

Answer 3

The amount of the difference between the debits and the credits that have been entered into an account.

Question 4

chart of accounts

Answer 4

A list of the accounts in the ledger.

Question 5

correcting journal entry

Answer 5

An entry that is prepared when an error has already been journalized and posted.

Question 6

common stock

Answer 6

The stock outstanding when a corporation has issued only one class of stock.

Question 7

credit

Answer 7

Amount entered on the right side of an account.

Question 8

debit

Answer 8

Amount entered on the left side of an account.

Question 9

dividends

Answer 9

Distribution of a corporation’s earnings to stockholders.

Question 10

double-entry accounting system

Answer 10

A system of accounting for recording transactions, based on recording increases and decreases in accounts so that debits equal credits.

Question 11

expenses

Answer 11

Assets used up or services consumed in the process of generating revenues.

Question 12

horizontal analysis

Answer 12

Financial analysis that compares an item in a current statement with the same item in prior statements.

Question 13

journal

Answer 13

The initial record in which the effects of a transaction are recorded.

Question 14

journal entry

Answer 14

The form of recording a transaction in a journal.

Question 15

journalizing

Answer 15

The process of recording a transaction in the journal.

Question 16

ledger

Answer 16

A group of accounts for a business.

Question 17

liabilities

Answer 17

The rights of creditors that represent debts of the business.

Question 18

normal balance of an account

Answer 18

The normal balance of an account can be either a debit or a credit depending on whether increases in the account are recorded as debits or credits.

Question 19

posting

Answer 19

The process of transferring the debits and credits from the journal entries to the accounts.

Question 20

retained earnings

Answer 20

Net income retained in a corporation.

Question 21

revenues

Answer 21

Increases in assets from performing services or delivering products to customers.

Question 22

rules of debit and credit

Answer 22

In the double-entry accounting system, specific rules for recording debits and credits based on the type of account.

Question 23

slide

Answer 23

An error in which the entire number is moved one or more spaces to the right or the left, such as writing $542.00 as $54.20 or $5,420.00.

Question 24

stockholders’ equity

Answer 24

The owners’ equity in a corporation.

Question 25

T account

Answer 25

The coordination and control of materials, services, information, and finances as they move in a process from supplier, through the manufacturer, wholesaler, and retailer to the consumer.

Question 26

transposition

Answer 26

An error in which the order of the digits is changed, such as writing $542 as $452 or $524.

Question 27

trial balance

Answer 27

A summary listing of the titles and balances of accounts in the ledger.

Question 28

unadjusted trial balance

Answer 28

A summary listing of the titles and balances of accounts in the ledger prior to the posting of adjusting entries.

Question 29

unearned revenue

Answer 29

The liability created by receiving revenue in advance.