Accounting Chapter 3
Categories of accounts that are increased with debits
Assets and Expenses
Categories of accounts that are increased with credits
Liabilities, Stockholders' Equity, and Revenues
General Ledger
A "book" of all the accounts
Journal
A chronological record of transactions; the record of original entry
Describe a Trial Balance
A list of each account and its balance
Chart of Accounts
A numerical list of all the accounts used by a company
Account
A record used to accumulate the increases and decreases in each of the financial statement elements; assets, liabilities, stockholders' equity, revenues, and expenses
What does Debit mean?
An entry on the left side of an account
What does Credit mean?
An entry on the right side of an account
The accounting equation must always _________ for each transaction
Balance
What does a Trial Balance prove?
Debits = Credits
Is a Trial Balance a financial statement?
No
The Normal Balance of an Account
The increase side of an account is its Normal Balance
Posting
The process of transferring the amounts from a journal to the ledger accounts
For every transaction at least ______ items are affected
Two
Event
a happening of consequence to an entity
Source Document
a piece of paper that is used as evidence to record a transaction
For any transaction, it is essential to analyze its effect on the
accounting equation
Internal Event
an event occurring entirely within an entity
Example of a Source Document
an invoice from a supplier, a time card for an employee
Transaction
any event that is recognized in a set of financial statements
Cost Principle
the cost principle requires assets to be recorded at the cost to acquire them and remain at that amount on the balance sheet until their disposal
Example of an Internal Event
the use of a piece of equipment