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Fundamentals Flashcards

1
Q

Assets

A

Things you own (e.g. house, car, etc.)

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2
Q

Liabilities

A

Debts you owe (e.g. house or car loan)

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3
Q

Two definitions of Equity

A

1) Income + Expenses
2) What’s left over from Asset - Liabilities

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4
Q

The two components of Equity

A

1) Income/Revenue
2) Expenses

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5
Q

The AE (Accounting Equation)

A

Assets = Liabilities + Equity

  • Must ALWAYS be balanced. If not, there’s a problem.
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6
Q

What is a debit?

A

A record of the money flowing into an account (dr).

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7
Q

What is a credit?

A

A record of the money flowing out of an account (cr).

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8
Q

Credited

A

Act of entering a credit (money flowing out of an account)

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9
Q

Debited

A

Act of entering a debit (money flowing into the account)

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10
Q

Assets add _______ to the normal balance

A

Debits = Increase debit/decrease credit

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11
Q

Expenses add _______ to the normal balance

A

Debits = Increase debit/decrease credit

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12
Q

Liabilities add _______ to the normal balance

A

Credits = Decrease debit/increase credit

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13
Q

Equities add _______ to the normal balance

A

Credits = Decrease debit/increase credit

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14
Q

Revenues add _______ to the normal balance

A

Credits = Decrease debit/increase credit

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15
Q

Ledger - the contents of a book

A

The set of accounts for a business used to summarize and classify transactions. The bridge to cross over to the financial statements.

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16
Q

What is the COA (the table of contents of a book)?

A

Chart Of Accounts

Listing of all the accounts used by a business to record and classify financial transactions

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17
Q

What is in the Trial Balance (the summary of a book)?

A

Two column summary of all the debits and credits in the COA. Shown at the end of an accounting period. Debits (left) will ALWAYS equal credits (right).

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18
Q

What are the six steps in the Bookkeeping Cycle?

A

1) Transactions
2) Journal
3) Ledger
4) Trial Balance
5) The three Financial Statements
6) Closing Entries

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19
Q

What is the place transactions are first recorded?

A

The Journal

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20
Q

What is the “book of original entry”?

A

The Journal

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21
Q

What order does the Journal run in?

A

Chronological

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22
Q

What are the two types of Journals?

A

1) General Journal
2) Special Journal

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23
Q

What is the process of recording transactions in chronological order called?

A

Journalizing

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24
Q

What’s the next step after recording transactions in the Journal?

A

Posting the info to the Ledger

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25
Q

What is the process of transferring info from the Journal into the Ledger called?

A

Posting

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26
Q

What three steps are involved in posting?

A

1) Recording the date and the amount
2) Recording the PR (Posting Reference from the Journal)
3) Recording the posting in the Journal

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27
Q

What types of journals and ledgers help organize bookkeeping making it more efficient?

A

Subsidiary/Special Journals/Ledgers

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28
Q

What are four examples of special journals?

A

1) Cash Receipts Journals (CRJ)
2) Cash Dispersement Journal (CDJ)
3) Purchase journal (P)
4) Sales journal (S)

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29
Q

What doesn’t fall into one of the four special journals falls into ____?

A

The general journal

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30
Q

What are three advantages of special journals?

A

1) Organization - reduces clutter by consolidating
2) Efficiency - less posting, post only GROUPS into the ledger
3) Focus - one special journal at a time

31
Q

What does the Sales Journal (S) record?

A

Sales made “on account” (i.e. no cash received)

32
Q

What is another name for Special Ledger?

A

Subsidiary Ledger

33
Q

What are the two most common Special/Subsidiary Ledgers?

A

1) Accounts Receivable (Asset)
2) Accounts Payable (Liability)

34
Q

What are three advantages of the Special/Subsidiary Ledgers?

A

1) Organization - GROUPS
2) Efficiency - Fewer posts to the General Ledger
3) Security - internal controls

35
Q

What side of a T-Account are debits on?

A

Left

36
Q

What side of a -T-Account are credits on?

A

Right

37
Q

What are two types of Cash Journals?

A

1) Cash Receipt Journal (CRJ)
2) Cash Disbursement Journals (CDJ)

38
Q

How often are receipts (cash, checks, credit cards, etc.) recorded in the Cash Receipts Journal (CRJ)?

A

Daily

39
Q

Which subsidiary journal are receipts recorded in?

A

Cash Receipts Journal (CRJ)

40
Q

In which subsidiary journal is cash received from sales on account recorded?

A

Cash Receipts Journal (CRJ)

41
Q

What is segregation of duties and which subsidiary journal does it apply to?

A

He who handles cash should not record cash in the Cash Receipts Journal (CRJ)

42
Q

Which subsidiary journal is used to record financial transactions that spend cash?

A

The Cash Disbursement Journal (CDJ)

43
Q

Which two types of purchases are recorded in the Cash Disbursement Journal (CDJ)?

A

1) Cash Purchases
2) Purchases on account

44
Q

What does it mean when sales are made “on account”?

A

No cash was received

45
Q

Where are sales made “on account” recorded?

A

Accounts Receivable Journal

46
Q

What are five types of bank security bookkeepers can easily implement?

A

1) PINs
2) Passwords
3) Two-factor authentication
4) Dual signatures (on checks)
5) Payment limits

47
Q

What is the international equivalent of GAAP?

A

IFRS (International Financial Reporting Standards)

48
Q

What is the international equivalent of FASB?

A

IASB (International Accounting Standards Board)

49
Q

When are transactions recorded using the accrual basis?

A

When money is earned

50
Q

When money is earned on account using the accrual basis, what account is debited?

A

Accounts Receivable

51
Q

When money is received for a transaction on account, what accounts are affected?

A

Debit Cash

Credit Accounts Receivable

52
Q

What are probable economic benefits obtained or controlled by an entity as a result of past transactions or events?

A

Assets

53
Q

What is the value of your business after deducting your liabilities from your assets?

A

Equity

54
Q

What is the total amount of money you would realize if your debt was paid off and your assets were liquidated called?

A

Equity

55
Q

What is it called when every transaction has at least one debt and one credit?

A

Double-entry accounting

56
Q

What accounting principle forces us to use the accrual basis of accounting to match expenses with revenue?

A

Matching Principle

57
Q

What is used to classify and summarize financial transactions?

A

The Ledger

58
Q

What is a two-column summary of all the debits and credits in the COA?

A

The Trial Balance

59
Q

What financial statement answers the question ‘what is the equity in my business’?

A

The Balance Sheet

60
Q

What financial statement answers the question ‘where did my cash come from and go to’?

A

The Statement of Cash Flows

61
Q

What financial statement answers the question ‘what is my profit’?

A

The Income Statement

62
Q

What statement covers operating, investing and financing activity?

A

Statement of Cash Flows

63
Q

Journal entries with 1xxx account numbers signify what kind of account?

A

Asset accounts

64
Q

Journal entries with 2xxx account numbers signify what kind of account?

A

Liability accounts

65
Q

Journal entries with 3xxx account numbers signify what kind of account?

A

Equity accounts

66
Q

Journal entries with 4xxx account numbers signify what kind of account?

A

Income/Revenue accounts

67
Q

Journal entries with 5xxx account numbers signify what kind of account?

A

Costs accounts

68
Q

Journal entries with 6xxx account numbers signify what kind of account?

A

Expense accounts

69
Q

Journal entries with 7xxx account numbers signify what kind of account?

A

Other income accounts

70
Q

Journal entries with 8xxx account numbers signify what kind of account?

A

Other expense accounts

71
Q

When money is earned on account using the accrual basis, what account is credited?

A

Revenue

72
Q

Dividends (or Drawings) add _______ to the normal balance

A

Debits = Increase debit/decrease credit

73
Q

What is the T Table mnemonic to remember what goes to Debit and Credit in accounting?

A

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