Accounting 225-Chapter 2
a journal entry should contain which of the following information:
-accounts and amounts debited -the date -description of the transaction -accounts and amounts credited
accounts on the left side of the accounting equation (assets) are increased with a ____ to the account, whereas accounts on the right side of the accounting equation are increased with a _____
-debit -credit
the sum of accounts with _____ balances must equal the sum of the accounts with ______ balances
-debit -credit
types of accounts which affect retained earnings are:
-expenses -dividends -revenues
examples of external transactions
-paying salaries to employees -borrowing money from the bank -purchasing inventory from suppliers
examples of internal transactions:
-using supplies purchased and paid for last month earning revenues after cash is received in advance from customers
the full set of accounting procedures used to measure and communicate business transactions is referred to as the
accounting cycle
elements of the accounting equation are represented by _______, which are contained in the general ledger
accounts
t-account
an account that is used informally for analysis instead of drawing a formal general ledger account
a proper journal entry should have which account title and amount indented
credit
in a double-entry accounting system, the right side of the account is referred to as a _____
credit
to increase a revenue account, you should ____ the revenue account
credit
first step for analyzing the effect of transactions is:
determine one account in the accounting equation that will increase or decrease
an ___________ transaction involves an exchange between the company and a separate economic entity
external
example of an external transaction:
purchasing supplies from a vendor
prepaid rent
rent paid in advance
two components of stockholders' equity:
retained earnings and common stock
posting
the process of transferring information from a journal entry to the specific accounts affected in the general ledger
a corporation purchases equipment for cash. the balance sheet effects of the transaction are:
total assets will remain the same
a separate _______ is used to post transactions and provides a summary of the effects of all transactions for a particular item
account
accounts receivable are:
assets in the balance sheet
accounting equation:
assets= liabilities + stockholders' equity
journal provides:
chronological record of all transactions affecting a firm
in a double-entry accounting system, the _______ represents the left side of the account
debit
to increase an expense account, you should ____ the expense account
debit
after the accountant analyzes the impact of a transaction on the accounting equation, the next step in the measurement process is to:
determine the accounts to debit and credit
True or false: the two roles of financial accounting are to measure business activities and communicate those measurements to taxing authorities
false
true or false: the term debit means increase, and the term credit means decrease
false
revenues cause retained earnings to:
increase
effects of borrowing money from a bank
increase in assets increase in liabilities
effects of issuing stocks for $20
increase in cash and common stocks
transactions are classified as:
internal or external transactions
what type of transactions are recognized at the end of accounting period?
internal tranactions
an event that affects the financial position of a company but does not include an exchange with a separate economic entity is an:
internal transaction
the effect of purchasing supplies on account:
liability increases
chart of accounts
list of all account names and numbers used by a company
Kim pays for two years of rent in advance. the effect on the balance sheet is:
no effect on total assets
true or false: the accounting equation must always remain in balance
true
