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Flashcards in Chapter 2 Deck (23):
1

Account

A detailed record of all increases and decreases that have occurred in an individual asset, liability, or equity during a specific period.

2

Notes Receivable

(Asset) A written promise that a customer will pay a fixed amount of money and interest by a certain date in the future. usually more formal than an Accounts Receivable.

3

Prepaid Expense

(Asset) A payment of an expense in advance. It is considered an asset because the prepayment provides a benefit in the future. Examples of prepaid expenses are Prepaid Rent, Prepaid Insurance, and Office Supplies.

4

Notes Payable

(Liability) A written promise made by the business to pay a debt, usually involving interest, in the future.

5

Accrued Liability

An amount owed but not paid. A specific type of payable such as Taxes Payable, Rent Payable, and Salaries Payable.

6

Unearned Revenue

(Liability) Occurs when a company receives cash from a customer but has not provided the product or service. The promise to provide services or deliver goods in the future.

7

Common Stock

(Equity) Represents the net contributions of the stockholders in the business. Increases equity.

8

Dividends

(Equity) Distributions of cash or other assets to the stockholders. Decreases equity.

9

Revenues

(Equity) Earnings that result from delivering goods or services to customers. Increases equity. Examples include Service Revenue and Rent revenue.

10

Expenses

(Equity) The cost of selling goods or services. Decreases equity. Examples include Rent Expense, Salaries Expense, and  Utilities Expense.

11

Chart of Accounts

A list of all of a company's accounts with their account numbers.

12

Double-Entry System

A system of accounting in which every transaction affects at least two accounts.

13

Ledger

The record holding all the accounts of a business, the changes in those accounts, and their balances.

14

T-account

A summary device that is shaped like a capital T with debits posted on the left side of the vertical line and credits on the right side of the vertical line.

15

Debit

(DR) The left side of a T-account

16

Credit

(CR) The right side of a T-account

17

Normal Balance

The balance that appears on the increase side of an account.

18

Source Document

Provides the evidence and data for accounting transactions.

19

Journal

A record of transactions in date order.

20

Posting

Transferring data from the journal to the ledger.

21

Compound Journal Entry

A journal entry that is characterized by having multiple debits and/or multiple credits.

22

Trial Balance

A list of all ledger accounts with their balances at a point in time.

23

Debt Ratio

Shows the proportion of assets financed with debt. 

(Debt Ratio = Total liabilities/ Total assets)