International accounting standards 2

Question 1

An account is …

Answer 1

an individual accounting record of increases and decreases in a specific asset, liability, or equity item.

Question 2

A account consists of three parts:

Answer 2

(1) a title,
(2) a left or debit side (Dr.), and
(3) a right or credit side (Cr.).

Question 3

Debits:

Answer 3

Increase assets
Decrease liabilities&quity

Question 4

Credits:

Answer 4

Decrease assets
Increase liabilities&equity

Question 5

Asset accounts normally show …

Answer 5

debit balances. debits to a specific asset account should exceed credits to that account.

Question 6

Liability accounts normally show

Answer 6

credit balances. credits to a liability account should exceed debits to that account.

Question 7

Dr./Cr. Procedures for Equity: owner’s capital

Answer 7

Debits:
- Decrease owner’s capital / share capital
/ common stock
Credits:
- Increase owner’s capital / share capital
/ common stock

Question 8

Dr./Cr. Procedures for Equity: Retained Earnings

Answer 8

Debits:
- Decrease retained earnings
Credits:
- Increase retained earnings

Question 9

What are retained earnings?

Answer 9

Retained earnings is net income that is kept (retained) in the business. It represents the portion of equity that the company has accumulated through the profitable operation of the business. The typical balance is credit, but if the business is suffering losses (especially over a longer
time) it can be debit as well

Question 10

Dr./Cr. Procedures for Equity: dividends and owner’s drawings

Answer 10

Debits:
-increase
Credits:
-decrease

Question 11

Dividends / Owner’s drawings decrease …

Answer 11

retained earnings. They are a company’s distribution to its shareholders.

Question 12

Dr./Cr. Procedures for Equity: revenues and expenses

Answer 12

Debits:
- Increase expenses
- Decrease revenues
Credits:
-Decrease expenses
- Increase revenues
If revenues are higher than expenses – there is a profit and in effect retained earnings
increase.
If expenses are higher than revenues – there is a loss and in effect retained earnings decrease.

So, we can say that revenues increase retained earnings (and equity), while expenses
decrease retained earnings (and equity).

Question 13

These three steps are called the recording process:

Answer 13

1) Analyze a transaction
2) Enter the transaction in the journal
3) Transfer the journal information to the ledger accounts

Question 14

What is the journal?

Answer 14

the journal is the book of original entry.
- discloses in one place the complete effects of a
transaction;
- provides a chronological record of transactions
- helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared.

Question 15

What is simple entry?

Answer 15

If an entry involves one debit and one credit account

Question 16

What is compound entry?

Answer 16

If an entry that requires three or more accounts

Question 17

Ledger (znaczenie)

Answer 17

księga główna

Question 18

subsidiary ledgers (znaczenie)

Answer 18

analityka

Question 19

What is ledger?

Answer 19

The entire group of accounts maintained by a company.

Provides the balance in each of the accounts as well as keeps track of changes in these balances.

Companies may use various kinds of ledgers, but every company has a general ledger

Question 20

The (General ledger):

Answer 20

Individual Assets:
* Equipment
* Land
* Supplies
* Cash
Individual Liabilities:
* Interest payable
* Salaries and wages payable
* Accounts payable
* Notes payable
Individual quity:
* Salaries and wages expense
* Service revenue
* Dividends
* Retained earnings
* Share capital

Question 21

What is posting?

Answer 21

transferring the journal entries to the ledger

Question 22

What is charts of accounts?

Answer 22

Lists the accounts and the account numbers that identify their location in the ledger.

Numbering system: Usually starts with the statement of financial position accounts and follows with the income statement accounts.

Number of accounts: Depends on the amount of detail management desires.

Companies leave gaps to permit the insertion of new accounts as needed during the life of the business.

Question 23

The trial balance:

Answer 23

A list of accounts and their balances at a given time.
Proves the mathematical equality of debits and credits after posting.
- List the account titles and their balances in the appropriate debit or credit column
- Total the debit and credit columns.
- Verify the equality of the two columns

Question 24

A trial balance may balance even when:

Answer 24

• Transaction not journalized.
• Correct journal entry not posted.
• Journal entry posted twice.
• Incorrect accounts and/or sides used in journalizing or posting
• Offsetting errors made in recording the amount of a transaction

Question 25

offsetting (znaczenie)

Answer 25

kompensowanie

Question 26

trial balance (znaczenie)

Answer 26

bilans próbny / saldo próbne

Question 27

Currency signs:

Answer 27

• Do not appear in journals or ledgers.
• Typically used only in the trial balance and the financial statements.
• Shown only for the first item and the total in the column.

Question 28

Underlining:

Answer 28

• A single line is placed under the column of figures to be added or subtracted.
• Totals are double-underlined.

Question 29

Period (periodicity) assumption:

Answer 29

Accountants divide the economic life of a business into
artificial time periods.

Question 30

Period assumption (znaczenie):

Answer 30

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