chapter 2.4: how do transactions affect accounts? Flashcards
what is transaction analysis?
process of studying transactions that have ecnomic effect on an entity
have to do it in terms of A = L + SE
what are the two rules of the accounting equation (A = L + SE) that must be respected with transaction analysis
- every transaction affects at least two accounts (dual effects)
it is important to note which are the ones affected
- the accounting equation must remain in balance after each transaction
a promise to perform a business transaction in the future but no product or service is received should be record for nah?
nah boy
True or false
Every transaction affects at least two accounts (duality of effects).
truuuue
what are the steps to analyze a transaction
Step 1: Identify and classify accounts and effects
Identify the accounts affected.
Classify them by type of account.
Determine the direction of the effect.
Step 2: Verify accounting equation is in balance.
A = L + SE
what is an account?
standardized record that co ponies use to accumulate the monetary effects of transactions on each financial statement item
cumulative results of each account will then be recorded on the stamens of finical position
how do we keep track of account balances
with general ledger (T accounts)
general journal
how do we keep tract of transactions?
you make different accounts for like CASH, equipment, Inventory, etc
Every single account will have its own folder
Each will have sub accounts (they are not written because of relevance
use a chart of accounts
t accounts (general ledger), what are its uses?
tool for summarizing transactions effect for each account
tool to determine balances
tool to draw interfaces about a companies activities
how does a t account function
each t account has two sides which determine the direction
left side is the debit side ( + ) and right side is the credit side ( - )
assets increase on the debit side and decrease on the credit side
liabilities increase on the credit side and decrease on the debit side
what is a journal entry
accounting method for expressing the effects of a transaction on various accounts
uses the double entry book keeping system
in a journal entry, is it important to put the date of the transaction?
ye booooy
in a journal entry, must the credit and debit balance per each transaction?
yeee booooy
in the account titles (middle part) part of the journal entries, where to credits go and where do debits go?
credits go at the bottom
debits go at the top
what is a compound entry
a journal entry that affects more than two accounts
