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...