Accounting Chapter 2 – Flashcards

a record of increases and decreases in each of the basic elements of the finical statements

the list of accounted used by a company

-describes the system used by companies to record the effects of transactions on the accounting equation -each transaction affects at least two accounts

how transactions are typically analyzed

debit side

credit side

-assets have normal debit balances because they are on the left side (debit side) of the accounting equation -therefore, assets are always increased on the debit side of the t-account and decreased on the credit side

-liabilities have normal credit balances because they are on the right side (credit side) of the accounting equation -therefore, liabilities are always increased on the credit side of the t-account and decreased on the debit side

-stockholders equity accounts (common stock and retained earnings) have normal credit balances because they are on the right side (credit side) of the accounting equation -therefore, common stock and retained earnings are always increased on the credit side of the t-account and decreased on the debit side.

-revenues have normal credit balances because they increase retained earnings, which is on the credit side of the accounting equation -therefore, revenues are always increased on the credit side of the t-account and decreased on the debit side

-expenses have normal debit balances because they decrease retained earnings, which is on the credit side of the accounting equation -therefore, expenses are always increased on the debit side of the t-account and decreased on the credit side

-dividends have normal balances because they decrease retained earnings, which is on the credit side of the accounting equation -therefore, dividends are always increased on the debit side of the t-account and decreased on the credit side

a chronological record showing the debit and credit effects of transactions on a company

-what each transaction is represented by so that the entire effect of a transaction is contained in one place -has three parts: 1- the date of the transaction 2- the accounts and amounts to be increased or decreased 3- a brief explanation of the transaction

simply a collection of all the individual financial statement accounts that a company uses

the process of transferring the information from the journalized transaction to the general ledger

-a list of all active accounts and each accounts's debit or credit balance -the accounts are listed in the order they appear in the ledger-assets first, followed by liabilities, stockholders' equity, revenues, and expenses