Accounting Chapter 3

Categories of accounts that are increased with debits

Assets and Expenses

Categories of accounts that are increased with credits

Liabilities, Stockholders' Equity, and Revenues

General Ledger

A "book" of all the accounts

Journal

A chronological record of transactions; the record of original entry

Describe a Trial Balance

A list of each account and its balance

Chart of Accounts

A numerical list of all the accounts used by a company

Account

A record used to accumulate the increases and decreases in each of the financial statement elements; assets, liabilities, stockholders' equity, revenues, and expenses

What does Debit mean?

An entry on the left side of an account

What does Credit mean?

An entry on the right side of an account

The accounting equation must always _________ for each transaction

Balance

What does a Trial Balance prove?

Debits = Credits

Is a Trial Balance a financial statement?

No

The Normal Balance of an Account

The increase side of an account is its Normal Balance

Posting

The process of transferring the amounts from a journal to the ledger accounts

For every transaction at least ______ items are affected

Two

Event

a happening of consequence to an entity

Source Document

a piece of paper that is used as evidence to record a transaction

For any transaction, it is essential to analyze its effect on the

accounting equation

Internal Event

an event occurring entirely within an entity

Example of a Source Document

an invoice from a supplier, a time card for an employee

Transaction

any event that is recognized in a set of financial statements

Cost Principle

the cost principle requires assets to be recorded at the cost to acquire them and remain at that amount on the balance sheet until their disposal

Example of an Internal Event

the use of a piece of equipment