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Applied Accounting – Test Study Guide – Chapters 1-3

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Income Statement
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The first financial accounting statement
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Statement of Owner’s Equity
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The second financial accounting statement
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Balance Sheet
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The third and last financial accounting statement
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Income Statement
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Revenue – Expenses = Net Income
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Statement of Owner’s Equity
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Beginning Capital + Net Income (or loss) + Withdrawals (deposits) = Ending capital
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Balance Sheet
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Total Assets = Total Liabilities + Owner’s Equity
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Owner’s Equity
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Found on two financial statements
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Credit
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Liabilities increase by a (Debit/Credit)
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Debit
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Assets increases by a (Debit/Credit)
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Credit
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Cash increases by a (Debit/Credit)
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Debit
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Withdrawals increases by a (Debit/Credit)
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Credit
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Revenues increases by a (Debit/Credit)
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Debit
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Expenses increases by a (Debit/Credit)
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Normal debit/credit
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When Assets (cr) = Liabilities (dr) + Owner’s Equity (dr) it is called
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Chart of Accounts
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A numbering system of accounts that lists the account titles and account numbers to be used by a company.
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By liquidity
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How is the chart of accounts ordered?
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Double Entry Bookkeeping
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An accounting system in which the recording of each transaction affects two or more accounts and the total of the debts is equal to the total of the credits.
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Trial Balance
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A list of the ending balances of all the accounts in a ledger. Debits should equal credits.
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Trial Balance
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A listing of all the accounts from the ledger
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Journal
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A listing of business transactions in chronological order. The Journal links on one page the debit and credit part of the transactions.
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Ledger
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A group of accounts that record data from business transactions.
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Fiscal Year
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The 12 month period of a business chooses for its accounting year.
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Calendar Year
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January 1 to December 31.
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Accounting Cycle
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For each accounting period, the process that begins with the recording of business transactions or procedures into a journal and ends with the completion of a post-closing trial balance.
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Cross it out, correct, initial
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If you make a mistake after posting you ___.
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Cross it out, Correct, Initial
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If you make a mistake before posting you ___.
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Correct the journal entry and explain, then do a separate entry
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To correct an entry posted to the wrong account you ___.
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Transactions Occur
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The first part of the accounting cycle is:
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Record Transactions in Journal
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The second part of the accounting cycle is:
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Post Journal info to Ledger
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The third part of the accounting cycle is:
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Post accounts from Ledger to Trial Balance
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The last part of the accounting cycle is: