Accounting 1 Chapter 4

¡Supera tus tareas y exámenes ahora con Quizwiz!

T-Account

A tool used by accountants to analyze business transactions; Efficient way to apply double-entry; Shows dollar increase and decrease to an account

Normal Balance

Always on the side used to record increases to an account

The left side of a T-Account is always the credit side.

False

Assets are increased on the debit side.

True

6 Steps for T-Accounts

1. Identify accounts affected. 2. Classify the accounts affected. 3. Determine which accounts are increased or decreased. 4. Determine which accounts are debited. 5. Determine which accounts are credited. 6. Compute T-Account. Make sure it balances and credits=debits normal balances.

Chart of Accounts

A list of all accounts used by a business; Number needed varies based on company size

Account

A location within an accounting system in which the increases and decreases are recorded and stored

Asset Accounts

Begin with 1

Liability Accounts

Begin with 2

Owner's Equity Accounts

Begin with 3

Revenue Accounts

Begin with 4

Expense Accounts

Begin with 5

A credit to a liability account decreases the account balance.

False

Asset accounts are increased on the credit side.

False

Credit means to decrease a liability.

False

Double-Entry Accounting

The financial record keeping system in which each business transaction affect at least two accounts

Debit

The left side of a T-Account; Increases for Assets, Decreases for Liability and Owner's Equity

Credit

The right side of a T-Account; Increases for Liability and Owner's Equity, Decreases for Assets

A credit is an amount entered on the right side of the T-Account.

True

Ledger

Where accounts are grouped together

A debit to one asset account and a credit to another asset account will result in the basic accounting equation being out of balance.

False

Double-entry accounting is the record keeping system in which business transactions affect at least one account.

False

Every business transaction affects at least two accounts that are on different sides of the basic accounting equation.

False

Liability and capital accounts are increased on the debit side.

False

The normal balance side of an owner's capital account is the debit side.

False

The right side of a T-Account is always the debit side.

False

Capital is increased on the credit side.

True

Debits and credits are used to record increases and decreases in each account affected by a business transaction.

True

Each account has a specific side that is its normal balance side.

True

For every debit there must be an equal credit.

True

If the accounting equation is not in balance after a transaction has been recorded, one reason may be that debit or credit was not reported.

True

The basic accounting equation may be expressed as A - L = O

True

The normal balance side of an account is the same side used to increase the account.

True

Debit means to increase an account balance.

False

For every debit made in one account, a credit entry must be made in another account.

True

The T-Account is an inefficient method for analyzing many business transactions.

False

When analyzing business transactions, you should ask yourself which accounts are affected.

True

Liabilities are decreased on the credit side.

False

The normal balance side for an asset account is the debit side.

False

Rules for Asset Accounts

1. An asset account is increased on the debit side (left). 2. An asset account is decreased on the credit side (right). 3. The normal balance for an asset is the increase side, or the debit side.

Rules for Liability and Owner's Equity Accounts

1. Liability and owner's equity accounts are increased on the credit side (right). 2. Liability and owner's equity accounts are decreased on the debit side (left). 3. The normal balance for liability and owner's capital accounts is the increase side, or credit side.


Conjuntos de estudio relacionados

Writing Polynomial Functions from Complex Roots

View Set

Erikson, Piaget, and Freud's Stages of Development

View Set

Artificial Intelligence (AI)(ch. 15)

View Set

Drugs and Society Chapter 7 Test Review

View Set

Participation and Voting (Chapter 7)

View Set