Chapter 3-4 Flashcards
examples of business transactions
cash transactions, credit transactions, asset transactions, stock transactions, and accrual transactions.
examples of source documents
invoices, receipts, deposit slips, checks, travel documents, timecards, orders, credit memos
what are source documents
anything that documents a transaction. proof of transaction
how does the objectivity principle tie in with source documents?
objectivity principle relates as The objectivity principle emphasises that financial statements should be objective, i.e., the accounting information should be unbiased. source documents help give proof so its not wrong
what happenes to source documents after accounting enteries have been completetd
the source documents are filed for future reference
what is an equation analysis sheet
tool of displaying individual transactions
steps to analyzing a transaction
- identify all assets and liabilites that must be changed and make changes
- see if the owners equity has changed
- make certain that at least two of the individual items have changed
- make sure that the equation is still in balance
what is transferred from the balance sheet to the equation analysis sheet
Assets, liabilities, and capital, totals of each account
what is a good clue to whether capital has increased or decreased?
if assets decrease and liabilites also decrease corresponding then capital is unchanged. if assets decrease and liabilites unchnaged, captial should be affected
Does a transaction always change both sides of the accounting equation.
Yes, because both sides have to be balanced.
what are ledger accounts
A General Ledger is a group or file of accounts.Each Account has a page(s) in the ledger. Transactions that affect the account are recorded on each account’s page
what are t-accounts
The T-accounts (or Ledger pages) are kept in the order in which the items are found on the balance sheet
which side is debit and credit
dr = left, cr = right
whcih side is assetes and liabilites
left = assets, right = liabilites
how to start a t account
Record name at top of account. Record Beginning balances on correct side.
what is the rule of debit and credit
Increases are shown on the samesideas the normal beginning balance of the account. Decreases are shown on the opposite side of the normal beginning balance of the account.
assets increase with a —- and decrease with a ——
debit, credit
liabilites —- with a debit, —— with a credit
decrease, increase
equity decrease with —– and increase with —
debit, credit
calculation account balance
- add up two sides total
- subrat smaller total from the larger
- cricle final number
expenitioal balance
An exceptional balance happens when an account shows the opposite balance. For example:
A credit balance in an asset account might mean that a customer overpaid, or you returned more goods than what was initially sold.
A debit balance in a liability account could indicate that you overpaid a supplier.
purchase on account
item purhcased on credit, not paid for at time of purchase
sale on account
item sold on credit, cash not receiived at the time it is solf
payement on account
money opaid out to a creditor to decrease the amount owed
