ACC 151 Ch. 2 – Flashcards
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The accounting process begins with:
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analysis of business transactions and events
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Early steps taken in the accounting process:
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Analyze each transaction, Record relevant transactions, Post journal information to ledger accounts, Prepare and analyze the trial balance
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Sales invoice
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used by sellers for recording purposes
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Source documents include:
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sales tickets, checks, purchase orders, bank statements
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Source documents
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are the sources of accounting information
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Various types of documents and other papers that companies use when they conduct their business:
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are called source documents, can include sale tickets, are the source of information for recording accounting entries, can be in electronic form
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Sellers require customers to have their receipts in order to exchange or return purchase items because
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sellers wish to ensure that the sale in question was rung up on the register in the first place
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Account
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a record of the increases and decreases in a specific asset, liability, equity, revenue or expense
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Common Stock
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an account used to record the owner's investment in the business
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Retained earnings account
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the account used to record the transfers of assets from a business to its stockholders
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Accounts payable
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promises of future payment
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Unearned revenues
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liabilities created when a customer pays in advance for products or services before the revenue is earned
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Prepaid expenses
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assets that represent prepayments of future expenses
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Note Payable
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a written promise to pay a definite sum of money on a specific future date
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Ledger
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a collection of all accounts (with account balances) used by a business - a record containing increases and decreases in a specific asset, liability, equity, revenue or expense item
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Cash accounts include:
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the value of any medium of exchange that a bank accepts for deposit
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Chart of Accounts
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a list of all accounts used by a company and the identification number assigned to each account
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General ledger of a business
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a collection of all accounts used in a company's information system
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Debit
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the left- hand side of a T- account (receiving)
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Credit
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the right side of a T- account (losing)
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A credit is used to record:
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an increase in an unearned revenue account
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T- account
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a simple account form widely used in accounting to illustrate how debits and credits work
