Unit 7

Question 1

Explaining the meaning of transaction

Answer 1

Transactions, or business transactions, are economic events of an enterprise that are recorded. Transactions may be identified as external or internal.

Question 2

Explaining the meaning of journal

Answer 2

A Journal entry is e formalised method for recording a business transaction .It is recorded in the accounting records of a business, usually in the general ledger.
Journal entries are used in double entry accounting system, where the intent is to record every business transaction in at least two places.
For example, when a company sells for cash, this increases both the revenue account and the cash account.
Or, if merchandise is acquired on account, this increases both the account payable account end the inventory account.

Question 3

Explaining the meaning of ledger

Answer 3

Transactions are then recorded, posted to, individual accounts in the ledger.
The book in which the accounts are traditionally kept is known as the ledger (and accounts are sometimes referred to as ‘ledger accounts’).

Question 4

Explaining the meaning of T-account

Answer 4

An account is an individual accounting record of increases and decreases in a specific asset, liability, or stockholders equity item. T-Account is a tool used to represent an account.
In its simplest form, an account consists of three parts: (1) the title of the account, (2) a left or debit side, and a right or credit side.
Because the alignment of these parts of an account resembles the letter T, it is referred to as a T account. The left side of the T-account is always the debit side.
The right side of the T-account is always the credit side.

Question 5

Explaining the meaning of Account Balance

Answer 5

The account balance, at any point in time, is the arithmetic difference between the prior balance and the additions and subtractions

Question 6

Explaining the meaning of debits

Answer 6

A debit is an accounting entry that either increases an asset or expense account, or decreases a a liability or equity account. It is positioned to the left in the accounting entry.

Question 7

Explaining the meaning of credits

Answer 7

A credit is an accounting entry that either increases a liability or equity account, or dectreases an asset or expenses account. It is positioned to the right in the accounting entry.

Question 8

Can you illustrate the expansion of the accounting equation to include revenues and expenses.

Question 9

Can you describe how the expanded accounting equation stays in balance after every transaction. Make an example.

Question 10

Describe the bookkeeping process.