Debit & Credits

difference between a balance sheet and a trial balance

trial balance-internal document with a simple simple debit and credit mechanism balance sheet- external document with a more complex system

People who use trial balance and why?

used by auditors and accountants to track math or posting errors for 1) the general ledger account balances prior to their proposed adjustments 2) their proposed adjustments 3) all of the account balances after the proposed adjustments.

Why are sales a credit?

The account Sales is credited because a corporation's sales of products will cause its stockholders' equity to increase. A sole proprietorship's sales will cause the owner's equity to increase.

Wages Payable

Wages payable refers to the wages that a company's employees have earned, but have not yet been paid. Current Liability

depreciable assets

Assets whose value declines, or depreciates, over time.

Where do credit card payments get recorded?

Credit Card Payable-Debit Cash- Credit

Prepaid Insurance

Current Asset, Balance Sheet, Debit Prepaid insurance is a current asset when it's unexpired. When it is,it is recorded as Insurance Expense on your P&l. The expired cost is done at the end of every accounting period as an adjusting entry.

Stockholders' Equity

owners' equity of a corporation, consisting of contributed capital and retained earnings

Why are revenues credited?

revenues cause an increase to the owner's equity credit balance, a credit entry will be required. However, at the time that the revenue is recorded, the amount will be entered as a credit in a revenue account.

sundry expenses

sundry expenses are expenses that are small in amount and do not occur often.

Income Summary Account

used to accumulate and summarize the revenue and expenses for the period

What type of account is dividends

it is NOT an EXPENSE dividends have NO EFFECT on the company's income statement

When are expenses credited

1)the end-of-year closing entries 2)the reversing entry for a previous accrual adjusting entry involving an expense 3)an adjusting entry to defer part of a prepayment that was debited to an expense account 4)a correcting entry to reclassify an amount from the incorrect expense account to the correct account

Cash Over and Short

Income statement account used to record cash overages and cash shortages arising from errors in cash receipts or payments.

What type of account is accumulated depreciation?

It is a Contra-Asset, therefore it increases on the credit and decreases on the debit side. The opposite of an asset, why? Because it is an account used to accumulate the depreciation of an ASSET!

Miscellaneous Expense

Miscellaneous Expense is a DEBIT balance account Therefore, DEBITS increase and CREDITS decrease Liability BS/IS/SOE?

Why will some asset accounts have a credit balance?

Some assets would have a credit balance for a number of reasons. Continuing to depreciate an asset after its balance has reached zero Receiving and posting an amount that was greater than the recorded receivable. The amount of checks written exceeded the positive amount in the Cash account. Expenses occurred faster than the agreed upon prepayments.

dividend

The portion of corporate profits paid out to stockholders

Overstated

exaggerated

Things a journal entry would have in them

1) Date 2) Debit/Credit Amount 3)Memo/Notes 4) References

Why does the drawing account have a debit balance?

1) First the draw or withdrawal by the owner reduces the capital account 2) Second, because each transaction involves a debit and a credit, and because a withdrawal of cash requires a credit to the Cash account, the owner's drawing account will need a debit for the same amount.

What are the accounting entries for a fully depreciated vehicle?

1) debit Cash for the amount received, 2) debit Accumulated Depreciation for the car's accumulated depreciation 3) credit the asset account containing the car—such as Vehicles, Automobiles, or Cars 4) credit the account Gain on Sale of Vehicles for the amount necessary to have the entry's debit dollars equal to credit dollars.

When do you put parentheses ( ) around a number?

1) to indicate a negative amount/negative balance 2) to signify a credit balance in an account normally having a debit balance, or even a debit balance in an account that normally has a credit balance. 3) to simply indicate credit entries. Amounts without parentheses are debit entries. 4) used to indicate that the amount is to be subtracted. 5) In standard costing, the variances that are unfavorable are often shown in parentheses. Favorable variances are presented as amounts without parentheses.

Bill payable

A bill payable is a document which shows the amount owed for goods or services received on credit.

purchase discount

A cash discount claimed by a buyer for prompt payment of a balance due.

voided check

A check that cannot be processed because the maker has made it invalid.

Invoice

A form describing the goods or services sold, the quantity, and the price

special journal

A journal used to record only one type of transaction

bookkeeping

A part of accounting that involves only the recording of economic events

stock dividend

A pro rata (proportional to ownership) distribution of the corporation's own stock to stockholders.

Where in the chart of accounts is a suspense account located?

A suspense account could be located in any part of an organization's chart of accounts. In other words, a suspense account could be located in any of these sections: asset, liability, revenue, expense

adjusted trial balance

A trial balance prepared from a company's ledger accounts after journalizing and posting all adjusting entries. It shows the effects of all financial events that occurred during the accounting period.

How do you record the sales tax on the purchase of an asset?

Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. the sales tax should be recorded as part of the cost of the asset.

The difference between an accrual and a deferral

Accrual is before a receipt or payment Deferral is after a receipt or payment

retained earnings

An amount earned by a corporation and not yet distributed to stockholders.

Memorandum Entry

An entry in the journal that notes a significant event, but has no debit or credit amount.

reversing entry

An entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period.

What is the entry to remove equipment that is sold before it is fully depreciated?

Appreciated Depreciation

Dividends Payable

Current Liability, Balance Sheet, Credit

What is the entry for the down payment from a signed contract?

Debit-Cash Credit- Customer Deposits

How do I record an advance to an employee and the deduction?

Debit-Employee Advances/Other Advances Credit- Cash If the cash advance is repaid through payroll withholdings, the amount withheld will be recorded as a credit to Advance to Employees. If the employee gives the company a personal check to repay the advance, the Cash account is debited and the account Advance to Employees is credited

What is the difference between a nominal account and a real account?

Nominal account- temporary, closed at the end of the accounting year, income statement accounts, drawing accounts and retained earnings account Real account- permanent, carried forward into the new accounting year, B/S accounts

What is the entry when a company lends money to an employee?

Notes Receivable from Employees- Debit Cash- Credit When the company earns interest on the loan, the interest should be credited to Interest Revenue or Interest Income and should be debited to Interest Receivable or Cash

What is the difference between revenues and receipts?

Receipts-reported when cash is received Revenues-reported when cash is earned

What type of account is Allowance for Doubtful Accounts?

The allowance for doubtful accounts is a reduction of the total amount of accounts receivable appearing on a company's balance sheet, and is listed as a deduction immediately below the accounts receivable line item. This deduction is classified as a contra asset account.

The difference between a general ledger and a general journal

The difference between a GL and GJ is that a general journal is the preliminary to the general ledger. Amounts are recorded into a journal and sorted before they are housed in a general ledger.The general ledger accounts just houses the company accounts

Where is the discount on the purchase of office furniture recorded?

The discount is not recorded in Purchase Discounts as this account is only for the discounts on the purchase of merchandise that will be sold. That account might be Furniture and Fixtures or Office Furniture.

Reclassification

To reclassify an amount often means to move an amount from one general ledger account to another general ledger account.

Is the drawing account a capital account?

Yes, an owner's drawing account is a capital account. However, the drawing account is expected to have a debit balance, whereas the owner's main capital account is expected to have a credit balance

Post dated check

a check with a future date on it

credit balance

a condition that occurs when the total of the credits in an account is larger than the total of the debits in that account.

debit balance

a condition that occurs when the total of the debits in an account is larger than the total of the credits in that account.

What type of account is unearned revenue?

a liability account

cash dividend

a pro rata (proportional to ownership) distribution of cash to stockholders

What is a double entry system?

a system that rules that every transaction must have a debit and credit of equal value. The transactions are 2 or more.

T account

a tool for analyzing a business's financial position by showing, in a single table, the business's assets (on the left) and liabilities (on the right)

What is the difference between adjusting entries and correcting entries?

adjusting entries-are required every accounting period so that a company's financial statements reflect the accrual method of accounting. correcting entries- is needed only if an error is discovered in an account. Correcting entries can involve any combination of income statement and balance sheet accounts an erroneous amount was used in a previously posted entry an entry was recorded in the wrong account

deferred credit

an account with a credit balance that will be recognized as a revenue (or as an expense reduction) in a future period.

Why are expenses debited?

expenses are debited in order to cause a decrease in the owner's (or stockholders') equity.

suspense account

is an account in the GL where amounts are temporarily recorded. This account is used because the proper account could not be determined at the time that the transaction was recorded. When the proper account is determined, the amount will be moved from this account to the proper account.-Hold open items for unresolved issues or problems -Unconfirmed trades -Fails to receive -Returned deliveries

What is a general ledger account?

is an account or record that sorts or stores transactions of the B/S and Income Statement

What is a trial balance?

is an accounting/booking report that lists the balances of an organization's GL.

What is a journal entry?

is an entry that is recorded into a general journal.