Chapter 2 Flashcards
(26 cards)
Difference between internal and external events
External - involves exchange between. Company and another entity
Internal- affects financials inside a company alone
What is the first step in the accounting processing cycle?
Obtain information about transactions from source documents
General ledger
All T accounts for the company
Unadjusted trial balance
List of general ledger accounts after transactions ; before adjusting entries
Interest equation
Interest = principal * rate * time
Depreciation expense
Expected useful life; expected residual value
Bad debt expense
Amount of AR that will not be collected
Income statement
Change in shareholder’s equity (retained earnings)
What goes on an income statement
Sales revenue, cogs, gross profit, operating expenses, operating income, other expenses / income
Balance sheet
Presents financial position of a company
What goes on a balance sheet
Current assets: Cash, accounts receivables,supplies, inventory, prepaid rent; property and equipment; liabilities and shareholders equity
Statement of cash flows
Cash flows from operating activities , Cash flows from investing, cash flows from financing activities, net increase/ decrease in cash.
Statement of stockholder’s equity
Common stock, Net income, dividends
Natural balance of accounts receivable
Debit
Natural balance of supplies
Debit
Prepaid rent
Debit
Inventory
Debit
Natural balance of depreciation
Credit
Revenue
Credit
Accounts payable
Credit
Common stock
Credit
Retained earnings
Credit
Expenses
Debit
Transaction analysis
Deciding how A transaction affects the accounting equation (debit or credit)
