Chapter 2 Terminology

Question 1

Source documents

Answer 1

Identify and describe transactions and events entering the accounting system.

Question 2

Account

Answer 2

Is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense.

Question 3

General ledger

Answer 3

A record of all accounts and their balances.

Question 4

Cash account

Answer 4

Asset account; shows a company’s cash balance.

Question 5

Accounts receivable

Answer 5

Asset account; accounts recievables are held by a seller and a promises of payment from customers to sellers

Question 6

Notes receivables

Answer 6

Asset account; this is also known as a promissory note. A written promise to pay.

Question 7

Prepaid accounts

Answer 7

Asset accounts; assets from prepayments of future expenses (expenses expected to be incurred in future accounting periods).

Question 8

Supply accounts

Answer 8

Assets until used

Question 9

Equipment

Answer 9

Asset

Question 10

Buildings

Answer 10

Assets

Question 11

Land

Answer 11

Asset; building on the land is separate.

Question 12

Debtors

Answer 12

Those who owe money

Question 13

Creditors

Answer 13

Individuals and organizations that have rights to recurve payments from a company.

Question 14

Accounts payable

Answer 14

Liability; promises to pay later

Question 15

Notes payable

Answer 15

Liability; written promissory note to pay a future amount.

Question 16

Unearned revenue accounts

Answer 16

Liability; a liability that is recorded when customers pay in advance for products and services.

Question 17

Accrued liabilities

Answer 17

Amounts owed that are not yet paid.

Question 18

Owner investments

Answer 18

Equity; when an owner invests in a company, it increases both assets and equity. The increase to equity is recorded in the account titled COMMON STOCK.

Question 19

Owner distributions

Answer 19

Equity; when a corporation distributes assets to its owners, if decreases both company assets and total equity. The decrease is recorded in an account titled DIVIDENDS.

Question 20

Revenue accounts

Answer 20

Equity; sales of products and services to customers are recorded in revenue accounts, which increase equity.

Question 21

Expense accounts

Answer 21

Equity; costs of providing profits and services are recorded in expense accounts, which decrease equity.

Question 22

Chart of accounts

Answer 22

List of all ledger accounts with an identification number and assigned to each account

Question 23

T-Account

Answer 23

Represents a ledger account and is used to show the effects of transactions.

Question 24

The left side of an account is called…

Answer 24

Debit

Question 25

The right side of an account is called…

Answer 25

Credit

Question 26

Double-entry accounting

Answer 26

Demands the accounting equation remain in balance.

Question 27

Journal

Answer 27

A complete record of each transaction in one place

Question 28

Journalizing

Answer 28

Recording transactions in a journal

Question 29

Transferring journal entry information to the ledger is called….

Answer 29

Posting