Chapter 3: Flashcards
What are transactions?
Economic events that require recording in the financial statements.
What changes as a result of economic activity?
Assets, liabilities or stockholders equity.
What does the dual effect refer to?
If something on one side of the basic accounting equation is effected something on the other side is effected.
What is the first step in the 9 step accounting cycle?
Analyze the business transaction to see if there was one.
Is the financial position of assets, liabilities or stockholders’ equity effect?
debits or Dr. is recorded to the …?
Left.
If debits exceed credits….?
the account has a debit balance.
If credits exceed debits…?
the account has a credit balance.
Which accounts normally have a debit balance?
- D: debits are
- Expenses
- Assets
- Dividends
Which accounts normally have a credit balance?
- Revenues.
- Liabilities.
- Common stock
- Retained earnings
What is step 2 in The 9- step accounting cycle?
Journalize the entry:
What is step 3 in The 9- step accounting cycle?
Post the entry to a ledger.
What is the ledger?
The ledger is comprised of the entire group of accounts maintained by a company.
- You transfer from the journal to the ledger directly.
EX:
Cash goes in a T chart all debits on the left and credits on the right.
Equipment goes in a T chart all debits on left and credits on the right
What is step 4 in The 9- step accounting cycle?
prepare a trial balance
What is stated in the trail balance?
it is a list of accounts and their balances at a given time.
- accounts are listed in the order in which they appear in the ledger.
what is the point of the trial balance?
To prove that debits = credits.
