The Recording Process Flashcards
define an account
an individual accounting record of increases and decreases in a specific asset, liability, or owner’s equity item
what are the major activities in accounting?
identifying. recording, communicating
define identifying
listing down financial transactions
define the sub-activity of recording
classifying, summarizing, journalizing, posting
what are the parts of an account?
title
debit side
credit side
ledger is also known as
T- account
define debit balance
debit amount exceeds credit amount
double entry system
equality of debits and credits
assets
debit increase in assets
credit decrease in assets
debit balance
liabilities
debit decrease in liabilities
credit increase in liabilities
credit balance
owner’s capital
debit decrease
credit increase
credit balance
owner’s drawings
debit increase
credit decrease
debit balance
revenues
debit decrease
credit increase
credit balance
expenses
debit increase
credit decrease
debit balance
enumerate the recording process
ANALYZE each transaction
ENTER the transaction info in the journal
TRANSFER the journal info to the ledger accounts
what is a journal
book of original entry
shows the debit and credit effects on a specific account
define journalizing
entering transaction data in the journal
parts of a general journal
- date
- account titles and explanation
- debit account title
- credit account tile
- brief explanation of the transaction
- debit account title
- reference
- dr and cr column
define compound entry
an entry that requires three or more account
define a ledger
- entire group of accounts maintained by a company
- provides the balance in each of the accounts
define a general ledger
contains ALL ASSET, LIABILITY, and OWNER’S EQUITY ACCOUNT
define posting
the procedure of transferring journal entries to the ledger account
JOURNAL TO LEDGER
posting should be
- performed in chronological order
- all debits and credits of one journal entry must be posted
define chart of accounts
lists the accounts and account numbers that identify their location in the ledger
enumerate the recording steps:
- analyze what type of account is involved
2. determine whether to make a credit or debit
transaction 1
jam invests 10k in advertising company J
debit increase assets
credit increase owner’s equity (capital)
transaction 2
5k equipment note payable
debit increase assets (equipment)
credit increase liabilities (notes payable)
transaction 3
1200 cash advance from a client
debit increase assets (cash)
credit increase liabilities (unearned service revenue)
transaction 4
900 rent payment
debit increase expenses (rent expense)
credit decrease assets (cash)
transaction 5
600 for a one year insurance
debit increase assets (prepaid insurance)
credit decrease assets (cash)
transaction 6
advertising materials on account for 2500
debit increase expenses
credit increase liabilities
transaction 7
500 cash withdrawal by owner
debit increase owner’s drawings
credit decrease assets
transaction 8
employee salary paid 4000
debit increase expenses (wages expense)
credit decrease assets (cash)
transaction 9
receives 10k in cash for advertising services performed
debit increase in assets (cash)
credit increase in revenue (oe)
define a trial balance
list of accounts and their balances at a given time
proves the mathematical equality of debits and credits AFTER posting
uncovers errors in journalizing and posting
useful in the preparation of financial statements
steps in preparing a trial balance
- list the account titles and their balances in the appropriate dr cr colum
- total the dr and cr column
- verify the equality
