Chapter 2: The Recording Process
Dividend
A distribution by a corporation to its stockholders on a pro rata (equal) basis.
Three-column form of account
A form with columns for debit, credit, and balance amounts in an account.
Simple Entry
A journal entry that involves only two accounts.
Compound Entry
A journal entry that involves three or more accounts.
General Ledger
A ledger that contains all asset, liability, and stockholders' equity accounts.
Chart of Accounts
A list of accounts and the account numbers that identify their location in the ledger.
Trial Balance
A list of accounts and their balances at a given time.
Account
A record of increases and decreases in specific asset, liability, or stockholders' equity items.
Double-entry system
A system that records in appropriate accounts the dual effect of each transaction.
T-Account
The basic form of an account
Normal Balance
An account balance on the side where an increase in the account is recorded.
Journal
An accounting record in which transactions are initially recorded in chronological order.
Recording Process
Analyzing transactions, entering transactions in a journal, and posting transactions
Expanded Accounting Balance Equation
Assets = Liabilities + Common Stock + Retained Earnings + Revenues - Expenses - Dividends
Common Stock
Issued in exchange for the owners' investment paid in to corporation.
Retained Earnings
Net income that is kept (retained) in the business.
Journalizing
The entering of transaction data in the journal.
Ledger
The entire group of accounts maintained by a company. Accounts in ledger are assets, liabilities ,common stock, dividends, revenues, and expenses
Debit
The left side of an account. Accounts that have normal debit balances are dividends, assets, and expenses
General Journal
The most basic form of journal. Provides chronological record of transactions Helps locate errors because the debit and credit amounts foe each entry can be readily compared
Posting
The procedure of transferring journal entries to the ledger accounts.
Credit
The right side of an account.