Accounting review- Chapter 2
Equity accounts
aka shareholders equity- Common stock, dividends, revenues, expenses
trial balance
a list of accounts and their balances at a point in time, used to confirm sum of debit account balances and sum of credit account balances
general ledger
a record containing all accounts used by a company
account
a record of increases and decreases in a specified asset, liability, equity, revenue, or expense item
Liability accounts
accounts payable, notes payable, unearned revenue, accrued liabilities- amounts owed that are not yet paid (wages, taxes, and interest payable)
Asset accounts
cash, accounts receivable, notes receivable, prepaid accounts (aka prepaid expenses), supplies, equipment, buildings, land
Double Entry Accounting
for each transaction at least two accounts are involved, one debit and one credit. Accounting Equation must not be violated
journal
gives a complete record of each transaction in one place- showing debits and credits for each transaction chronologically. Includes: date of transaction, accounts affected, dollar amount of each debit and credit, and explanation of transaction
Account balance
the difference between total debits and total credits for an account, including any beginning balance. Normal account balances: assets-debit, liabilities-credit, equity-credit