Accounting review- Chapter 2

Equity accounts

aka shareholders equity- Common stock, dividends, revenues, expenses

trial balance

a list of accounts and their balances at a point in time, used to confirm sum of debit account balances and sum of credit account balances

general ledger

a record containing all accounts used by a company

account

a record of increases and decreases in a specified asset, liability, equity, revenue, or expense item

Liability accounts

accounts payable, notes payable, unearned revenue, accrued liabilities- amounts owed that are not yet paid (wages, taxes, and interest payable)

Asset accounts

cash, accounts receivable, notes receivable, prepaid accounts (aka prepaid expenses), supplies, equipment, buildings, land

Double Entry Accounting

for each transaction at least two accounts are involved, one debit and one credit. Accounting Equation must not be violated

journal

gives a complete record of each transaction in one place- showing debits and credits for each transaction chronologically. Includes: date of transaction, accounts affected, dollar amount of each debit and credit, and explanation of transaction

Account balance

the difference between total debits and total credits for an account, including any beginning balance. Normal account balances: assets-debit, liabilities-credit, equity-credit