Chapter 2

debit

The left side of a T-account

credit

The right side of a T-account

chart of accounts

a list of all account names used to record transactions of a company

T-account

a simplified form of a general ledger account with space at the top for the account title and two sides for recording debits and credits

A(n) ______ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.

account; general ledger

revenue recognition principle

companies recognize revenue in the period in which it is earned, regardless of when cash is actually received

Credits increase revenues, whereas debits increase

expenses and dividends

accounting cycle

full set of procedures used to accomplish the measurement/communication process of financial accounting

Which of the following contains a list of transactions affecting each account and the account's balance?

general ledger

what effect does revenue have on retained earnings?

increases

Transactions that are typically recognized at the end of the period and do not include an exchange with a separate company are referred to as ____ transactions.

internal

trial balance

list of accounts and their balances at a particular date, showing that total debits equal total credits

The purpose of a general ledger is to

provide in a single location the list of transactions affecting each account and the account's balance.

journal

provides a chronological record of all transactions affecting a firm

account

provides a record of the business activities related to a particular item

general ledger

provides, in a single collection, each account with its individual transactions and resulting account balance

The type of information included in an account includes

the account title and columns for debits and credits

journal entry

the format used for recording business transactions

external transations

transactions conducted between the company and a separate economic entity

posting

transferring the debit and credit information from the journal to individual accounts in the general ledger