Ch 3 Flashcards
External event
Event involving interaction between an entity
And it’s environment
Ex. Payment of wages to an employee, sale to a customer
Event
Happening of consequence to an entity
Ex. Sale made to customer, supplies purchased from vendor,
Loan taken from a bank
Internal event
Event occurring entirely within an entity
Ex. Use of piece of equipment
Transaction
Event that is recognized in set of financial statements
Source documents
Piece of paper used as evidence to record a transaction
Ex. Invoices, cash register tapes, time cards
Cost principle
Requires that we record an asset at cost to acquire it
And continue to show this amount on balance sheet until
We dispose of the asset
Account
Record used to accumulate amount for each individual asset,
Liability, revenue, expense and component of
stockholders equity
Chart of accounts
Numerical list of all accounts used by a company
General ledger
Book, file, hard drive or other device containing all accounts and their balances
T accounts
Convenient way to analyze activity of particular account
One side of account used to record increases, the other side to record decreases
Debit
Entry on left side of account
Credit
Entry on right side of account
Double entry system
System in accounting in which every transaction is recorded with equal debits and credits and the accounting equation is kept in balance
Journal
Chronological record of transactions
Posting
Process of transferring amounts from journal to ledger accounts
