Chp 2

Question 0

Defs of debit balance and credit balance

Answer 0

db = an account’s debits exceed its credits

cb = account’s credits exceed its debits

Question 1

Definition of account

Answer 1

Individual accounting record of the increases and decreases in a specific asset, liability, or owners’ equity item.

Question 2

Defs of debit and credit

Answer 2

Left side of an account, right side of an account

Question 3

Steps in the recording process (3)

Answer 3

1. Analyze transaction for its effects on the accounts.
2. Enter the transaction information in a journal.
3. Transfer journal info to the appropriate accounts in the ledger.

Question 4

Def of journal

Answer 4

Book of original entry.

For each transaction, shows the debit and credit effects on specific accounts.

Question 5

3 ways journal serves in the recording process

Answer 5

1. Shows complete effects of a transaction in one place.
2. Chronological log of transactions.
3. Helps to prevent or locate errors because dr and cr amounts can be easily compared.

Question 6

Def ledger

Answer 6

Entire group of accounts maintained by the company.

Question 7

Sequence of accounts in the ledger.

Answer 7

assets

liabilities

common stock

dividends

revenues

liabilities

Question 8

Structure of a journal page

Answer 8

date

account title and explanation

ref

dr

cr

Question 9

3 column form of account

Answer 9

date

explanation

ref

dr

cr

balance

Question 10

4 steps involved in posting

Answer 10

1. ledger - dr acct: enter date, journal page, and dr amount
2. journal - in reference column write acct number for that dr
3. ledger - cr acct: enter date, journal page, and cr amount
4. journal - write acct number in ref column

Question 11

Def of chart of accounts

Answer 11

List of all accounts and the account numbers that ID their locations in the ledger.

Question 12

Typical system of account numbering

Answer 12

assets - 100s

liabilities - 200s

SE - 300s

revenue - 400s

expenses - 500s, or 500s - 600s

Then other revenues, other expenses

Question 13

Def of prepaid expenses

Answer 13

Payment of expenses that will benefit more than one accounting period.

Question 14

3 steps of transaction analysis

Answer 14

1. Determine type of account involved
2. Determine what items increased or decreased, and by how much.
3. Translate the increases and decreases into debits and credits.

Question 15

Def of trial balance

Answer 15

List of accounts and their balancces at a given time.

Question 16

3 steps for preparing trial balance

Answer 16

1. List account titles and their balances
2. total the dr and cr columns
3. prove equality of the two columns

Question 17

4 things to check for when trial balance does not balance

Answer 17

1. If error is 1, 10, 100, or 1000, re-add and try again
2. If error is divisible by 2, scan to check whether 1/2 of error is in wrong column.
3. If divisible by 9, look for transposition error from journal to ledger
4. If not div by 2 or 9, scan to see whether a posting was omitted.