Chapter 4 - The Bookkeeping Process & Transactional Analysis Flashcards
What is account balance?
The arithmetic sum of the additions and subtractions to an account through a given date.
What is accrual?
The process of recognizing revenue that has been earned but not collected, or an expense that has been incurred but not paid.
What does accrued mean?
Describes revenue that has been earned and a related asset that will be collected, or an expense that has been incurred and a related liability that will be paid.
What is an adjustment?
An entry usually made during the process of ‘closing the books’ that results in more accurate financial statements. Adjustments involve accruals and reclassifications.
What does balance refer to in accounting?
See account balance.
What is a charge in bookkeeping?
A synonym for debit.
What is a chart of accounts?
An index of the accounts contained in a ledger.
What does closing the books mean?
The process of posting transactions, adjustments, and closing entries to the ledger and preparing the financial statements.
What is credit in accounting?
The right side of an account. A decrease in asset and expense accounts; an increase in liability, stockholders’ equity, and revenue accounts.
What is debit in accounting?
The left side of an account. An increase in asset and expense accounts; a decrease in liability, stockholders’ equity, and revenue accounts.
What is an entry in accounting?
A journal entry or a posting to an account.
What is a horizontal model?
A representation of the balance sheet and income statement relationship that is useful for understanding the effects of transactions and adjustments on the financial statements.
What is a journal?
A chronological record of transactions.
What is a journal entry?
A description of a transaction in a format that shows the debit account(s) and amount(s) and credit account(s) and amount(s).
What is a ledger?
A book or file of accounts.
What does ‘on account’ mean?
Used to describe a purchase or sale transaction for which cash will be paid or received at a later date.
A ‘credit’ transaction.
What does ‘post’ refer to?
The process of recording a transaction in the respective ledger accounts using a journal entry as the source of the information recorded.
What is a source document?
Evidence of a transaction that supports the journal entry recording the transaction.
What is a T-account?
An account format with a debit (left) side and a credit (right) side.
What is transaction analysis methodology?
The process of answering five questions to ensure that a transaction is understood:
1. What’s going on?
2. What accounts are affected?
3. How are they affected?
4. Does the balance sheet balance? (Do the debits equal the credits?)
5. Does my analysis make sense?
What are transactions?
Economic interchanges between entities that are accounted for and reflected in financial statements.
