Chapter 2 Vocabulary

Question 1

account

Answer 1

accounting form that is used to record the increases and decreases in each financial statement item

Question 2

T account

Answer 2

left side= debit side; right side= credit side

Question 3

debit

Answer 3

amount entered on the left side of an account

Question 4

credit

Answer 4

amount entered on the right side of an account

Question 5

balance of the account

Answer 5

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

Question 6

ledger

Answer 6

group of accounts for a business entity

Question 7

chart of accounts

Answer 7

list of the accounts in the ledger

Question 8

assets

Answer 8

resources owned by the business entity

Question 9

liabilities

Answer 9

debts owed to outsiders (creditors)

Question 10

stockholders’ equity

Answer 10

stockholders’ right to the assets of the business

Question 11

dividends

Answer 11

distributions of earnings to stockholders

Question 12

revenues

Answer 12

increases in stockholders’ equity (retained earnings) as a result of selling services or products to customers (ex. fees earned, fares earned, commissions revenue, and rent revenue)

Question 13

expenses

Answer 13

result from using up assets or consuming services in the pprocess of generating revenues (ex wages expense, rent expense, utilities expense, supplies expense, and miscellaneous expense)

Question 14

double-entry accounting system

Answer 14

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

Question 15

rules of debit and credit

Answer 15

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

Question 16

normal balance of an account

Answer 16

can be a debit or credit depending on whether increases in the account are recorded as credits or debits

Question 17

journal

Answer 17

record of transactions

Question 18

journalizing

Answer 18

process of recording a transaction in the journal

Question 19

journal entry

Answer 19

entry in the journal

Question 20

posting

Answer 20

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

Question 21

trial balance

Answer 21

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

Question 22

unadjusted trial balance

Answer 22

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

Question 23

transposition

Answer 23

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

Question 24

slide

Answer 24

an error in which the entire number is moved on or more places to the right or the left, such as writing $542.00 as $54.20 or $5420.00

Question 25

correcting journal entry

Answer 25

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

Question 26

horizontal analysis

Answer 26

amount of each item on a current financial statement is compared with the same item on an earlier statement