Chapter 3

Question 1

What is the Accounting Informations System

Answer 1

The system used to collect and process transaction data and communicate financial information

Question 2

What is an Accounting Transaction

Answer 2

Business transactions of an economic nature are the raw data of accounting. Transactions are economic events (changes the financial position of the company) that must be recorded in the financial statements

Question 3

What is an Account

Answer 3

Basic element used to classify and summarize business transactions.

Question 4

5 Account Classifications

Answer 4

Assets DR
Liabilities CR
Shareholders Equity CR
Revenue CR
Expenses DR

Question 5

Explain Debits and Credits in every Account

Answer 5

Debit is on the left side and Credit is on the right.

Question 6

Normal vs Contra Accounts

Answer 6

The Contra balances are opposite. Assets normal balance is DR and a contra asset would be CR

Question 7

Recording the Transactions (increase & decrease)

Answer 7

To increase an account you must record the account the same side
To decrease an account you must record the account on the opposite side of normal balance

Question 8

Explain Journaling

Answer 8

Business transactions are recorded in chronological order with both sides (DR and CR). For the journal entry to balance, DR must equal CR.

Question 9

Anything with Prepaid is a… (Current or Non-Current) (Asset or Liability)

Answer 9

Current Asset

Question 10

What is the General Ledger

Answer 10

T charts for DR and CR transactions under each account. next step after journaling.

Question 11

What is a Trial Balance

Answer 11

Accounting worksheet which lists all DR and CR balances before closing entries. Total DR must equal total CR for trial to balance