Ch. 2 Flashcards Preview

Accounting 2020 > Ch. 2 > Flashcards

Flashcards in Ch. 2 Deck (23)
Loading flashcards...
1
Q

Which side of the T-account is the credit and which is Debit?

A

Debit is left and Credit is Right

2
Q

How do you know the balance of a t-account

A

The two sides of the account is compared. If the Debits exceed credit its a Debit Balance. If Credits exceed Debits its a Credit balance.

3
Q

What are Credits/Debit effects on Assets?

A

Increases to Assets are Debited
Decreases to Assets are Credited

Assets
Dr Cr
+ -

4
Q

What are Credit/Debit Effects on Liabilities?

A

Decreases to Liabilities are Debited
Increases to Liabilities Credited

Liabilities
Dr Cr
- +

5
Q

What are the Credit/Debit effect on Share Capital-Ordinary?

A

Decreases are Debited
Increases are Credited

Dr. Cr.
- +

6
Q

What are the Credit/Debit effects on Retained Earnings?

A

Decreases are Debited
Increases are Credited

Dr. Cr.
- +

7
Q

What are the Credit/Debit Effects on Dividends?

A

Increases are Debited
Decreases are Credited

Dr. Cr.
+ -

8
Q

What are the Credit/Debit Effects on Revenues?

A

Decreases are Debited
Increases are Credited

Dr. Cr.
- +

9
Q

What are the Credit/Debit effects on Expenses?

A

Increase are Debited
Decreases are Credited

Dr. Cr.
+ -

10
Q

Summerise the Debit/credit effects on the Accounting equation?

A

Assets, Expenses and Dividends = Dr. + and Cr. -

Liabilities, ShareCapital, Retained Earnings and Revenues = Dr. - and Cr. +

11
Q

Explain the 3. steps in the Recording Process.

A
  1. Analyse the Transactions, 2. Enter the Transaction in the Journal. 3. Transfer journal information to ledger account.
12
Q

Explain the three important contribution the Journal makes to the Recording process.

A
  1. It discloses in one place the complete effect of a transaction
  2. It provides chronological record of transactions
  3. It helps prevent and locates errors
13
Q

Explain the explain the technical aspects on creating the journal?

A

Date of transaction chronologically. Specific Account effected in the event. The Amount in Debit/credit colum. brief explanation of the event. References column for when the journal entries are transferred to the the ledger.
It can be done in Single entries (meaning just two accounts are affected) or Compound entries (three or more accounts)
Debits are always listed on top of Credits.

14
Q

What is the content of the Ledger?

A

The general ledger contains all Assets, Liabilities and Equity accounts

15
Q

What are some indivdual Assets accounts?

A

Equipment, Land, Supplies, Cash, Account Receivable etc.

16
Q

What are some Individual Liabilities accounts?

A

Interest Payable, Sales and Wages Payable, Accounts Payable, Notes Payable etc.

17
Q

What are some individual Equity accounts?

A

Salaries and wages expense, Service revenues, Retained Earnings, Share Capital-Ordinary, etc.

18
Q

What is posting? What are the four steps

A

Posting is the procedure of transferring journal entries to ledger accounts.

  1. Debit appropriate accounts in Ledger
  2. write account number in reference in the journal
  3. Credit appropriate account in the ledger
  4. Write account number in reference in the journal
19
Q

What is the trial balance?

A

A trial balance is a list of accounts and their balances at a given time. It proves the mathematical equality of Debits and Credits after Posting and can therefore also uncover errors. It’s also useful in prepping statements later.

20
Q

What are the 3 steps in preparing the Trial Balance?

A
  1. list accounts titles and their balances in the appropriate debit and credit column.
  2. Total debit and credit columns
  3. Verify the equality of the two columns
21
Q

How do you locate errors in the trial balance?

A

Firstly you find the difference. Then follow one of the 4 steps.

  1. If the error is 1, 10, 100, 1000 Re-add the trial balance Columns and recompute the account balances
  2. It the Error is divisible by 2, scan the trial balance to see whether a balance equal to half the error has been entered in the wrong column.
  3. if the Error is divisible by 9, retrace the account balances on the trial balance to see whether they are incorrectly copied from the ledger. Transposition Error.
  4. If its not divisible by 2 or 9, scan the ledger to see whether and account balance in the amount of the error has been omitted from the trial balance, and scan the journal to see whether a posting of that amount has been omitted.
22
Q

When are currency sign and underlining used?

A

Currency sign are only used in trial balance and financial statement - not in journals and ledgers.
One line is used under totals for one account like total expenses. Double lining is used under total amounts.

23
Q

The expanded accounting equation?

A

Assets = liabilities + (ShareCapital + Retained Earnings + Rev. + Exp. + Div.)