The Balance Sheet

The cost principle requires what

Assets be recorded at the amount paid for them at the time of purchase

Business documents

Bills, invoices, stock certificates

A company typically receives this when it issues stock to its owners (an asset)

Cash

Debit must always equal what in each journal entry

Credit

Who has claim to a business's assets should the company go out of business?

Creditors

Cost

Dollar amount that represents the value of items given and received

Steps for ledger accounts

Dollar amounts from journal entries are copied (posted) the appropriate accounts in the ledger, so that the account balances can be posted

An accounting system provides

Fiancial information needed to manage a company and financial information needed to report results to outsiders

Cost principle

Financial effects of exchange

Financing activities

Issuing a note payable, and issuing stock

Transactions are first entered into the

Journal

Financing

Key activity of starting up a company; 2 sources are available: equity (through owners contributions and reinvestments of profit) and debt (loans)

The effect of journal entries on each account is summarized in the

Ledger

A chart of accounts is a

List of account titles with corresponding reference numbers used by companies so that the transaction items are consistently named

Account titles that may be used to record borrowing cash in exchange for a promissory note

Note payable, loan payable

Business's typically buy goods and services from others

On account

When a company pays its suppliers for accounts owed, its cash and accounts ________ accounts are decreased

Payable

Key activities necessary to starting a business

Purchase assets, obtain financing

Investing activities

Purchasing land, purchasing equipment

Accounts payable is in increased with an entry on the _______ side of the account

Right

The contributed capital account is increased with an entry on the _______ side of the T-account

Right

The current ratio measures a companys

ability to pay and short-term liquidity

On the balance sheet, equipment is reported at its

original cost

Accounting cycle

repeated day after day, month after month, year after year

The balance sheet at year end shows

the ending balance in each T-account

Notes payable are like accounts payable except that they

1. charge interest 2. can be outstanding for large periods of time 3. are documented using formal documents called notes

List the steps in the accounting order in chronological order

1. record journal entry 2. summarize in the ledger (t-accounts) 3. prepare an unajusted trial balance 4. adjust the accounts 5. prepare financial statements 6. close the books

Chart of accounts

A list that designates a name and reference number that the company will use when accounting for each item it exchanges