Accounting 101 Final (Chapter 2)
Be able to calculate the ending balance of an account.
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How do transactions affect the Accounting Equation? For example, know the effects for the following transactions: owner invests in business; purchase supplies for cash; purchase supplies on account; earn a revenue, and receive cash; earn a revenue and receive a promise of cash at a later date.
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What is the purpose of a trial balance.
A trial balance lists all accounts with their balances, assets first, then liabilities and stockholders' equity. Shows whether total debits equal total credits.
Define account and know the account types.
Account is the record of all the changes in a particular asset, liability, or stockholders' equity during a period. The account is the basic summary device of accounting. Accounts: Assets Cash Accounts Receivable Notes Receivable Inventory Prepaid Expenses Prepaid Rent, Prepaid Insurance, & Supplies Land Buildings Equipment, Furniture, and Fixtures (depreciated) Liabilities Accounts Payable Notes Payable Accrued Liabilities Interest /Salary/Income Tax Payables Stockholders' (Owners') Equity Common Stock. RE (cumulative net income earned - cumulative net losses & dividends.) Dividends (decrease in Retained Earnings) Revenues Expenses (decrease stockholders' equity) Cost of Goods Sold Expenses: Salary, Rent, Adverts, Ins, Utilities, Inc Tax
Difference between Accounts Receivable and Accounts Payable
Accounts receivable: Money owed to a business by its clients (customers or debtors) and shown on its balance sheet as an asset Accounts payable: Money owed by a business to its suppliers shown as a liability on a company's balance sheet
Left side/Right side
Debit/Credit
Initial recording of transaction is made in a journal/general journal (called journal entry, journalizing). The entry is then posted to ledger/general ledger.
journal/ledger
