FABM FIRST SEM MIDTERMS

journal

A chronological record of events or business transactions showing all effects of each transaction in terms of debits and credits.

Accounting Cycle

Uniform procedures done to accomplish the accounting process

Date, Account titles and explanation, PR or posting reference, debit, credit

a journal entry should contain the following

depreciation expense

allocation of plan asset cost over its estimated useful life.

accrued expenses

expenses already incurred or used, but not yet paid

prepayments

expenses already paid but not yer incurred

ledger

group of accounts used by the company book of final entry

accrued income

income already earned but not yet received

unearned or deferred income

income already received but not yet earned

chart of accounts

list of all account titles used by the company with their corresponding account numbers

bad debts or doubtful accounts

losses due to uncollectible accounts

transplacement error

occurs when a decimal point has been moved or misplaced.

transposition error

occurs when order of two numbers are reversed

deferral

postponement of the recognition of an expense already paid but not incurred or revenue already collected but not earned decreases the balance sheet account and increases an income statement account

journalizing

process of recording a transaction in the journal after it has been recognized and measured.

posting

process of transferring info from the journal to the ledger

accrual

recognition of an expense already incurred but unpaid or revenue earned but uncollected increases both balance sheet and an income statement account

trial balance

schedule of all balances to provide the equality of the debit and credit

general journal

simplest journal

normal balance of an account

the side of account where increase are recorded

balance sheet and income statement

two general groups of ledger

adjusting journal entries

used to update the accounts prior to the preparation of financial statements because they affect more than one accounting period.

compound journal entry

when a transaction would require the use of three or more accounts

simple journal entry

when only two accounts are affected- debit and credit

to ensure that the revenue recognition and expense recognition principles are followed thus resulting to financial statements reporting

why are adjusting entries needed at the end of the accounting period?

Because transactions are initially recorded in the journal

why is the journal called the "book of original entry"?