Flashcards in Ch 3 Deck (42):
Happening of consequence
An event that is the source or cause of changes in assets, liabilities and equity.
May be internal or external
External event involving transfer or exchange between 2 or more entities
Shows effect of transactions and other events on specific element.
Separate account for each element
On balance sheet
They all appear on income except for dividends
General ledger is a collection of all asset liability equity revenue and expense accounts
Contains details related to general ledger account
Book of original entry
Initially records transactions and selected other events
General journal lists transactions chronologically
Journalizing is entering transaction data in journal
Process of transferring essential facts and figures form book of original entry to ledger.
List of all open accounts in ledger and balances.
Made at the end of period to bring all accounts up to date on accrual basis so the financial statements can be made
Financial statements t
-- shows financial condition of enterprise at end of period
--measures result of operations during period.
Statement of cash flows
--reports cash provided and used by operating investing and financing activities during period
Statement of retained earnings
--reconciles balance of etsinrd earnings account from beginning to end .
Close all temp accounts
Debits and credits do not mean
Increase or decrease but instead describe where a company makes entries in recording process
Double entry accounting
Company records dual effect of each transaction in appropriate accounts.
A transaction effects how many accounts?
Two or more
General journal entry consists of 4 parts
1. Accounts and amounts to be debited
2. ". " to be credited
1. In ledger, appropriate columns of accounts devoted, enter date, journal page and debit amount
2. In reference column of journal write the account number to which the debit amount was posted
3. " " same as 1 but credit
4. " " same as 2 but credit
The # in posting reference columns serves 2 purposes
1. Indicates ledger account # involved
2. Indicates completion of posting for particular item
Trial balance lists the accounts in?
The order they appear on ledger .
The balance of 2 columns must agree
What does the trial balance prove?
Equality of debits and credits after posting
What are the procedures for preparing trial balance?
1. List the account titles and balances in appropriate debit or credit column.
2. Total debit and credit columns
3. Provide equality of columns.
A trial balance does not prove what
That a company recorded all transactions or ledger is correct.
Use of adjusting entries make what possible?
Report on balance sheet the appropriate assets liabilities and equity at statement date
To report on income that proper revenues and expenses for period
The trial balance, the first pulling together of transaction data may not contain ho to date and complete data because?
1. Some events not recorded daily
2. Some costs are not recorded during period because costs expire
3. Some items may un recorded
--expenses paid in cash before used or consumed
--cash received before services are performed
--revenues for services performed but not yet received in cash or recorded
--expenses incurred by not yet paid in cash.
Process of allocating cost of an asset to expense over its useful life in a rational and systematic manner.
Depreciation is a?
Estimate rather than factual measurement of expired costs.
Contra asset account
Offsets an asset account on balance sheet.
Accumulated depreciation normal balance is?
Cost minus accumulated depreciation
Why does asset book value generally differ from fair value?
Depreciation is an allocation concept not a valuation concept.
Assets cost to periods in which it is used.
What is the purpose of adjusted trial balance
Prove that credits = debits after all adjustments
Adjusted trial balance is the primary basis for
Preparation of financial statements
Post closing trial balance
Trial balance after closing.
Purpose of post closing trial balance?
Prove equality of permanent account balances that company carries forward into next accounting period.
Post closing trial balance includes only
Permanent (real) balance sheet accounts
Post closing trial balance provides evidence in
That company properly journalized and posted closing entries.
It shows the accounting equation is in balance at the end of accounting period.