Chapter 3: Recording Transactions

Question 1

Accumulated Depreciation

Answer 1

The cumulative sum of all depreciation recognized since the date of acquisition of an asset (p. 105)

Question 2

Allowance for Depreciation

Answer 2

See Accumulated Depreciation

Question 3

Balance

Answer 3

A numerical total that is the net result of all activity recorded in an account as of a particular point in time. In a T-account the balance is the difference between the total left side and right side amounts in the T-account at any particular time. The balance in a general ledger account at the end of an accounting period is computed as the beginning balance in the account, plus the amount of the increases in the account during the period, minus the amount of the decreases (p. 92)

Question 4

Book of Original Entry

Answer 4

Another name for the general journal (p. 96)

Question 5

Book Value

Answer 5

The balance of an account shown on the books minus the value of any associated contra accounts. For example, the book value of equipment is its acquisition cost minus accumulated depreciation (p. 105)

Question 6

Carrying Amount

Answer 6

See Book Value

Question 7

Carrying Value

Answer 7

See Book Value

Question 8

Charge

Answer 8

A word often used instead of debit (p. 95)

Question 9

Chart of Accounts

Answer 9

A numbered or coded list of all account titles (p. 96)

Question 10

Close the Books

Answer 10

To transfer the balances in all revenue and expense accounts to retained earnings, which resets the revenue and expense accounts to zero so that they are ready to record the next period’s transactions (p. 110)

Question 11

Closing Entries

Answer 11

Journal entries that transfer balances in the “temporary” stockholders’ equity accounts (revenue and expense accounts) to the “permanent” stockholders’ equity account, Retained Earnings (p. 110)

Question 12

Compound Entry

Answer 12

A transaction that affects more than two accounts (p. 13)

Question 13

Contra Account

Answer 13

A separate but related account that offsets or is a deduction from a companion account. An example is accumulated depreciation (p. 105)

Question 14

Contra Asset

Answer 14

A contra account whose companion account is an asset. A contra asset account has a credit balance. We deduct the balance in the contra asset from an asset account (p. 105)

Question 15

Correcting Entry

Answer 15

A journal entry that cancels a previous erroneous entry and adds the correct amounts to the correct accounts (p. 116)

Question 16

Credit

Answer 16

An entry or balance on the right side of any account (p. 95)

Question 17

Cross Referencing

Answer 17

The process of using numbering, dating, and/or some other form of identification to relate each general ledger posting to the appropriate journal entry (p. 99)

Question 18

Data Processing

Answer 18

The procedure used to record, analyze, store, and report on chosen activities (p. 119)

Question 19

Debit

Answer 19

An entry or balance on the left side of any account (p. 95)

Question 20

Double Entry System

Answer 20

The method usually followed for recording transactions, whereby every transaction affects at least two accounts (p. 92)

Question 21

General Journal

Answer 21

A complete chronological record of an organization’s transactions and how each transaction affects the balances in particular accounts (p. 92)

Question 22

General Ledger

Answer 22

The collection of all ledger accounts that supports an organization’s financial statements (p. 92)

Question 23

Journal Entry

Answer 23

An analysis of the effects of a transaction on the various accounts, usually accompanied by an explanation (p. 97)

Question 24

Journalizing

Answer 24

The process of entering transactions into the general journal (p. 97)

Question 25

Ledger Account

Answer 25

A listing of all the increases and decreases in a particular account (p. 92)

Question 26

Net Book Value

Answer 26

See Book Value

Question 27

Posting

Answer 27

The transferring of amounts from the general journal to the appropriate accounts in the general ledger (p. 98)

Question 28

Simple Entry

Answer 28

A journal entry for a transaction that affects only two accounts (p. 100)

Question 29

Source Documents

Answer 29

The original records supporting any transaction (p. 96)

Question 30

T-Accounts

Answer 30

Device used to portray the individual ledger accounts in the general ledger. Each T-account takes the form of the capital letter T and represents an individual ledger account. We accumulate transactions that affect a particular ledger account within the related T-account (p. 92)

Question 31

Trial Balance

Answer 31

T list of all the accounts in the general ledger together with their balances (p. 96)

Question 32

XBRL

Answer 32

Extensible Business Reporting Language, an XML based computer language that allows easy comparisons across companies (p. 119)