Chapter 2 Accounting II
Posting reference (PR) column
A column in journals in which individual ledger account numbers are entered when entries are posted to those ledger accounts.
Income Statement
A financial statement showing the revenue and expenses for a fiscal period.
Statement of Cash Flows
A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.
Balance Sheet
A financial statement that reports assets, liabilities, and owner's equity on a specific date.
Retained Earnings Equation
Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings
Calendar year companies
Businesses whose accounting year begins on January 1 and ends on December 31.
Ledger
The collection of all accounts and their balances.
Order of Financial Statements
income statement, statement of retained earnings, balance sheet, statement of cash flows
double-entry accounting
The recording of debit and credit parts of a transaction. Accounting system in which each transaction affects at least two accounts and has to have at least one debit and one credit.
chart of accounts
a list of all accounts used by a business. Has a identification number assigned to each account. Doesn't include account balances, just for listing identification numbers.
Trial Balance
a list of ledger accounts and their balances at one given point in time. IT IS NOT A FINANCIAL STATEMENT, but a tool for checking equality of debits and credits in the ledger.
Diff between balance sheet and trial balance
Aggregation- Balance sheet aggregates multiple accounts, while the trial balance presents information at the account level therefore more detailed. Standards- The balance sheet is structured in accordance with specific accounting standards, while there is no mandated format for a trial balance. Usage- The balance sheet is intended for external use, while the trial balance is for use within the accounting department and by auditors. Reporting level- the balance sheet is a final report, while the trial balance is used to construct other reports.
Balance Column Account
Different format of T-accounts, includes columns for debits and credits but also includes transactions date and explanation columns. Account with debit and credit columns for recording entries and another column for showing the balance of the account after each entry.
T-account cash
One account ( t-account) in a ledger for cash.
Journalizing
Recording transactions in a journal
Statement of Retained Earnings
Reports the way that net income and the distribution of dividends affected the financial position of the company during the accounting period.
balance column format
T-account with column for transaction date and explanation included. just the format for general ledgers.
Difference between a trial balance and balance sheet
The main difference between the trial balance and a balance sheet is that the trial balance lists the ending balance for every account, while the balance sheet may aggregate many ending account balances into each line item. The balance sheet is part of core group of financial statements. The trail balance is not an official financial statement and only used within accounting department and as a source document by a company's auditors. The trial balance is a standard report in most accounting software that lists the ending balance in every account as of a specific point in time.
Trail balance goal
Trial balance is not an official financial statement and only to be used internally in the accounting department. But it is used to help verify debits equal credits.
journal
all the transactions (t-accounts) chronologically recorded. A complete record of each transaction in one place.
general journal vs general ledger
general journals make up the accounts all classified together, which is called a ledger.
T-account
one account in a ledger account. Shows effects of transactions. ONE T SHAPED PART. WHOLE THING IS A JOURNAL MADE UP OF TRANSCATIONS THAT ARE MADE OF T-ACCOUNTS.
