Comm 1140 week 3 Flashcards
What are transactions?
Events that affect the operations or finances of an organisation.
What is transaction analysis?
An examination of each business transaction to understand its effect on the accounting equation.
What is the accounting equation?
Assets = Liabilities + Equity
What increases when you borrow $10,000 from a bank?
A liability and an asset both increase.
What does ‘CA’ stand for in the accounting equation?
Current Assets
What does ‘NCA’ stand for in the accounting equation?
Non-Current Assets
What does ‘CL’ stand for in the accounting equation?
Current Liabilities
What does ‘NCL’ stand for in the accounting equation?
Non-Current Liabilities
What does ‘SE’ represent in the accounting equation?
Shareholder’s Equity
When is revenue recognized?
When the service is provided.
What is unearned revenue?
A liability created when a deposit is received before the service is provided.
What is the golden rule of double entry accounting?
The accounting equation must always balance; debits = credits.
What does ‘Dr’ and ‘Cr’ stand for?
Debit and Credit.
What happens to assets when they increase?
They are debited.
What happens to liabilities when they increase?
They are credited.
What happens to equity when revenue increases?
It is credited.
What is a journal entry?
A shorthand version of transaction analysis prepared using the rules of debits and credits.
What is depreciation?
Allocation of the cost of a noncurrent asset to expense over the life of an asset.
What is recorded in a journal entry for depreciation?
Dr Depreciation expense xxx; Cr accumulated depreciation.
What happens when dividends are declared?
They create a liability that needs to be paid in the next 12 months.
What is the entry for declaring dividends?
Dr retained profits; Cr dividends payable.
What is the payment entry for dividends?
Dr Dividends payable; Cr Cash.
True or False: Increases in expenses are recorded as debits.
True.
Fill in the blank: Revenue is only recognised when the _______ is provided.
service
