Financial acctg Ch 3 & 4

Question 1

What is the sequence of recording accounting transactions?

Answer 1

Journal
Ledger
Trial Balance

Question 2

What is a journal?

Answer 2

A chronological record of transactions

Question 3

What is a ledger?

Answer 3

A collection of accounts and their balances

Essentially a collection of T accounts

Question 4

What is a trial balance?

Answer 4

A listing of accounts and their balances at a specific point in time

Question 5

Trial balance: what order are the accounts listed?

Answer 5

ALE RED

Asset accounts
Liability accounts
Equity accounts
Revenue accounts
Expense accounts
Dividends

Question 6

What are the three functions of a trial balance?

Answer 6

Proves total debits = total credits

Summarizes all accounts and their balances

Helps make any necessary adjustments at the end of an accounting period 

Question 7

What’s tricky about common stock as it relates to the balance sheet?

Answer 7

The shares issued are not owned by the company anymore, but they’re still listed on the balance sheet

(However the owners are more than just the company, so listing all owners’ ownership interest makes sense)