Week 3 business transactions cont, ledgers and journals Flashcards Preview

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Flashcards in Week 3 business transactions cont, ledgers and journals Deck (16)
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1
Q

define an account

A

account is an
– individual accounting record; of
– increases and decreases; in a
– specific asset, liability or owner’s equity item.

–	specific asset, liability or owner’s equity item.
Examples:
o	Cash
o	Accounts Payable
o	Capital Contributed
o	Service Revenue
o	Wages Expense
2
Q

define a debit

A

An accounting entry on the left-side that will; increase an asset account, decrease a liability account and decrease owners’ equity account

3
Q

Define a credit

A

An accounting entry recorded on the right side of an account, will decrease an asset increase a liability increase an owner’s equity item

4
Q

What is the extended accounting equation

A

Assets = Liabilities + (Capital – Drawings) + (Revenue – Expenses)
Which can be rearranged as:

Assets + Drawings + Expenses = Liabilities + Contributions + Revenue

5
Q

How would an 1.) increase and 2.) decrease of the following elements be recorded

Asset	
Liability	
Owner’s Equity	
(e.g. Capital contribution)	
(e.g. Drawings by owner)
Revenue	
Expenses
A
Asset	DR	CR
Liability	CR	DR
Owner’s Equity	CR
(e.g. Capital contribution)	DR
(e.g. Drawings by owner)
Revenue	CR	DR
Expenses	DR	CR
6
Q

general journal format includes

A

o Date of transaction
o Accounts involved
o Amount of transaction
o Brief narration to describe transaction (least important)

7
Q

Steps in journalising transactions

A
  1. Which elements are affected?
  2. e.g. Asset, Liability, Owner’s Equity, Revenue, Expenses
  3. Which specific accounts are affected?
    e. g. Cash, wages expense, bank loan, etc…
  4. Are the items increasing or decreasing?
  5. Do we Debit (left) or Credit (right)?
8
Q

explain general ledgers

A

o 6 steps for posting to ledgers

• Posting from general journal to general ledger is the second step of the accounting process
• Ledger accounts are a way of presenting and grouping transactions relating to a particular account (eg. Cash account, Capital account etc.)
• At the end of the financial period, the closing balance of each individual account is calculated
After conducting a general journal calculates different transactions (e.g. cash at bank account)

9
Q

General rule for debit and credit

A

Asset + Drawing + expense (increase = debit / decrease = credit)
= Liability + capital + revenue (increase = credit / decrease = debit)

10
Q

how to record credit sales

credit purchases

A

account receivable

account payable

11
Q

how to record accumulated depreciation

A

asset

12
Q

how to record depreciation

A

expense

13
Q

how to record a prepaid expense

A

asset

14
Q

Example of General Journal Process

1 Jan 2016: Loc Nguyen (owner) contributed $15,000 cash to the business
Analysis of transaction:

A

element: cash (asset) increase debit

element OE increase credit

15
Q

posting to ledgers

A

Refer to general journal to determine which accounts were debited and credited

Enter date in account to be debited
Enter name of the corresponding account that was credited
Enter amount to be debited
Repeat steps 1-4 for the credit side
At the end of financial period, calculate the closing balance

16
Q

what is the accounting process

A

:)