CH 2: Acct for Business Transactions

Question 1

Steps of the accounting process

Answer 1

1-identify transactions & source docs
2- analyze transactions using acct eq.
3- record journal entry
4- post entry to ledger

Question 2

the process of recording transactions in a journal

Answer 2

Journalizing

Question 3

Source documents (definition and examples)

Answer 3

documents that identify/describe transactions in an acct system

Yes
-sales receipts
-checks
-purchase orders
-bills from suppliers
-payroll records
-bank statements
-bills (telephone bill)

Question 4

what is an “account”

Answer 4

Record of increases/decreases in a specific asset, liability, equity, revenue, or expense

Question 5

what is the “ledger”

Answer 5

Record of all accounts and their balances for an acct. system

Question 6

What are the asset accounts

Answer 6

-cash
-acc receivable
-supplies
-land
-notes receivable
-equipment
inventory
-prepaid
-buildings

Question 7

what are liability accounts

Answer 7

-acct payable
-notes payable
-unearned revenue
-accured liability

Question 8

what are the equity accounts

Answer 8

-common stock
-dividends
-revnue
-expenses

Question 9

acct equation

Answer 9

assets= L + E

Question 10

cash

Answer 10

a companies cash balance

Question 11

acct receivable

Answer 11

promises of payment from customers

Question 12

notes receivable

Answer 12

held by a lender- a borrowers promise to pay the lender a specific amount of money

Question 13

prepaid asset

Answer 13

assets that arise from prepayment of future expenses

Question 14

accounts payable

Answer 14

held by a buyer- a buyers promise to pay later

Question 15

notes payable

Answer 15

held by a borrower-a written promissory note to pay later at a future date

Question 16

unearned revenue

Answer 16

when a customer pays in advance for products/services-liability to be settled int he future when goods/services are delivered

Question 17

accrued liability

Answer 17

amounts owed that are not yet paid

ex- wages payable, taxes payable

Question 18

equity

Answer 18

an owners claim on company assets

Question 19

common stock

Answer 19

when an owner invests in the company in exchange for stock

-inc both assets & equity

Question 20

dividends

Answer 20

distribution of assets to owners

-when dividends are paid out, dec both assets and equity

Question 21

revenue acct

Answer 21

amts received from sales of goods/services to customers

-increases equity

Question 22

expense accts

Answer 22

costs of providing goods/services

-decreases equity

Question 23

chart of accounts

Answer 23

list of all ledger accounts with an identification number to each account

Question 24

what are the numbers for chart of accounts

Answer 24

assets~101-199
Liabilities~200-299
equity~ 300-399
revenue~ 400-499
Expense~ 500-599

Question 25

debit vs credit vs zero balance

Answer 25

Debit Balance- Debits> Credits Credit Balance- Debits

Question 26

left vs right side

Answer 26

left-debit right-credit

Question 27

double entry accounting rules

Answer 27

1- at least 2 accounts involved 2- total amt debited = total amt credited

Question 28

Normal balances for each account

Answer 28

assets- debit dividends-debit expenses-debit liabilities-credit revenue-credit common stock- credit

Question 29

to decrease/increase the normal acct

Answer 29

increase- add to normal acct decrease-add to opposite account

Question 30

general journal

Answer 30

where you record each transaction

Question 31

how to find the ending balance of t accounts

Answer 31

1- use the normal balance side adn add everything up 2-subtract everything from the other side 3-list balance on normal balance side

Question 32

what do you always enter first in the general journal

Answer 32

debits before credits

Question 33

when creating the trial balance- what numbers do we input

Answer 33

the balance after all adjustments and what not- think of T-accts normal balance

Question 34

balance sheets are organized in how many catagories

Answer 34

3

Question 35

liability is an obligation of

Answer 35

the company to transfer assets to others

Question 36

what does a trial balance include

Answer 36

assets, liabilities, equity (perm accts)

Question 37

income statement posting time

Answer 37

month ended

Question 38

income statement

Answer 38

revenues-expenses

Question 39

statement of retained earnings posting time

Answer 39

for month ended