Accounting Chapter 2
trial balance
merely a listing of all accounts to insure all accounts with debit balances equal all accounts with credit balances. to make sure that we balance.
net income
retained earnings is increased by...
net income
revenues increase this and expenses decrease this
journal entries
the entry in the general journal for a particular transaction
general ledger
the place where the company keeps track of all its accounts
general journal
the place where the company records its transactions
account
the place where transaction pertaining to a specific type of asset, liability, owners' equity, revenue, expense, or other item are recorded.
double entry bookkeeping
two sides to every transaction
No effects on assets
The Kelly Company purchased a building for $75,000 in cash. What is the effect on assets?
Revenues, dividends, and expenses
What three things make up retained earnings?
Transaction
any event that has a financial impact on the business and can be measured reliably.
Steps in recording a transaction
-analyze transaction -determine debits & credits -record in accounting records -record in general journal -post to general ledger
Trial balance
A device used to prove the equality of debits and credits in the general ledger
Increase liability accounts
Credit entries are used to: -increase asset accounts -increase liability accounts -decrease revenue accounts
Increase asset accounts
Debit entries are used to: -Increase Asset Accounts -Decrease expense accounts -increase liability accounts -increase revenue accounts
debits must equal credits
For every transaction,
T-account
a simple way of depicting an account and the activity in it
Service revenue
all of the following accounts have normal debit balances except -dividends -service revenue -office supplies expense -accounts receivable
common stock and retained earnings
common stock includes
accounting equation
every transaction must keep this in balance...