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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
What is the process of transferring info from the Journal into the Ledger called?
Posting
26
What three steps are involved in posting?
1) Recording the date and the amount 2) Recording the PR (Posting Reference from the Journal) 3) Recording the posting in the Journal
27
What types of journals and ledgers help organize bookkeeping making it more efficient?
Subsidiary/Special Journals/Ledgers
28
What are four examples of special journals?
1) Cash Receipts Journals (CRJ) 2) Cash Dispersement Journal (CDJ) 3) Purchase journal (P) 4) Sales journal (S)
29
What doesn’t fall into one of the four special journals falls into ____?
The general journal
30
What are three advantages of special journals?
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
What does the Sales Journal (S) record?
Sales made “on account” (i.e. no cash received)
32
What is another name for Special Ledger?
Subsidiary Ledger
33
What are the two most common Special/Subsidiary Ledgers?
1) Accounts Receivable (Asset) 2) Accounts Payable (Liability)
34
What are three advantages of the Special/Subsidiary Ledgers?
1) Organization - GROUPS 2) Efficiency - Fewer posts to the General Ledger 3) Security - internal controls
35
What side of a T-Account are debits on?
Left
36
What side of a -T-Account are credits on?
Right
37
What are two types of Cash Journals?
1) Cash Receipt Journal (CRJ) 2) Cash Disbursement Journals (CDJ)
38
How often are receipts (cash, checks, credit cards, etc.) recorded in the Cash Receipts Journal (CRJ)?
Daily
39
Which subsidiary journal are receipts recorded in?
Cash Receipts Journal (CRJ)
40
In which subsidiary journal is cash received from sales on account recorded?
Cash Receipts Journal (CRJ)
41
What is segregation of duties and which subsidiary journal does it apply to?
He who handles cash should not record cash in the Cash Receipts Journal (CRJ)
42
Which subsidiary journal is used to record financial transactions that spend cash?
The Cash Disbursement Journal (CDJ)
43
Which two types of purchases are recorded in the Cash Disbursement Journal (CDJ)?
1) Cash Purchases 2) Purchases on account
44
What does it mean when sales are made “on account”?
No cash was received
45
Where are sales made “on account” recorded?
Accounts Receivable Journal
46
What are five types of bank security bookkeepers can easily implement?
1) PINs 2) Passwords 3) Two-factor authentication 4) Dual signatures (on checks) 5) Payment limits
47
What is the international equivalent of GAAP?
IFRS (International Financial Reporting Standards)
48
What is the international equivalent of FASB?
IASB (International Accounting Standards Board)
49
When are transactions recorded using the accrual basis?
When money is earned
50
When money is earned on account using the accrual basis, what account is debited?
Accounts Receivable
51
When money is received for a transaction on account, what accounts are affected?
Debit *Cash* Credit *Accounts Receivable*
52
What are probable economic benefits obtained or controlled by an entity as a result of past transactions or events?
Assets
53
What is the value of your business after deducting your liabilities from your assets?
Equity
54
What is the total amount of money you would realize if your debt was paid off and your assets were liquidated called?
Equity
55
What is it called when every transaction has at least one debt and one credit?
Double-entry accounting
56
What accounting principle forces us to use the accrual basis of accounting to match expenses with revenue?
Matching Principle
57
What is used to classify and summarize financial transactions?
The Ledger
58
What is a two-column summary of all the debits and credits in the COA?
The Trial Balance
59
What financial statement answers the question ‘what is the equity in my business’?
The Balance Sheet
60
What financial statement answers the question ‘where did my cash come from and go to’?
The Statement of Cash Flows
61
What financial statement answers the question ‘what is my profit’?
The Income Statement
62
What statement covers operating, investing and financing activity?
Statement of Cash Flows
63
Journal entries with 1xxx account numbers signify what kind of account?
Asset accounts
64
Journal entries with 2xxx account numbers signify what kind of account?
Liability accounts
65
Journal entries with 3xxx account numbers signify what kind of account?
Equity accounts
66
Journal entries with 4xxx account numbers signify what kind of account?
Income/Revenue accounts
67
Journal entries with 5xxx account numbers signify what kind of account?
Costs accounts
68
Journal entries with 6xxx account numbers signify what kind of account?
Expense accounts
69
Journal entries with 7xxx account numbers signify what kind of account?
Other income accounts
70
Journal entries with 8xxx account numbers signify what kind of account?
Other expense accounts
71
When money is earned on account using the accrual basis, what account is credited?
Revenue
72
Dividends (or Drawings) add _______ to the normal balance
Debits = Increase debit/decrease credit
73
What is the T Table mnemonic to remember what goes to Debit and Credit in accounting?

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