Chapter 2 Financial Accounting – Flashcards
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Cash
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this account reflects the company's cash balance (Asset)
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Accounts Receivable
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are held by a seller and refer to promises of payments from the customers to sellers. (asset)
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Notes receivable
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or promissory note,is a written promise of another entity t pay a definite sum of money on a specific future date to the holder of the note. (asset)
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Prepaid accounts
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are assets that represent prepayments of future expenses.
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Supplies Account
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are assets until they are used. (supplies)
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Equipment Accounts
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is an asset. It gradually depreciates over time.
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Building Accounts
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such as stores, offices, and warehouses, and factories are assets.
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Land
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The cost of land owned by a business
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Liability accounts
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type of account. this type of account is a claim against a creditor against assets, which means they are obligations to transfer assets or provide products or services to others.
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Accounts Payable
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(liability) refer to the oral or implied promises to pay later, which usually arise from purchases of merchandise
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Note Payable
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(liability). Refers to a formal promise, usually denoted by the signing of a promissory note, to pay a future amount.
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Unearned revenue
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refers to a liability that is settled in the future when a company delivers its products or services.
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Accrued Liabilities
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are amounts owed that are not yet paid. eg. wages payable, taxes payable, and interest payable.
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common stock - dividends + revenues - expenses
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equity =
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Equity Accounts
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the owners claim on a company's assets is called equity.
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owner investments (common stock)
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when the owner invests in a company in exchange for its common stock, it increases both assets and equity of the company.
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Owner distributions (dividends)
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When a corporation distributes assets to its owner it decreases both company asset and total equity.
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Revenue accounts
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the inflow of net assets from providing products and services to customers increases equity through increases in revenue account.
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Expense Account
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the outflow of net assets in helping generate revenues decreasing equity through increases in the expense account.
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Chart of Accounts
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is a list of all ledger accounts and includes an identification number assigned to each account.
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T-account
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represents a ledger account and is a tool used to understand the effects of one or more transactions
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debit
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the left side of the t-account (Dr)
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credit
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the right side of a t-account (Cr^2)
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Account balance
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the difference between total debits and total credits for an account.
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Double-entry accounting
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demands the accounting equation remain in balance and thus require that for each transaction: 1. At least two accounts are involved , with one being debit and one being credit. 2. the total amount debited must equal the total amount credited.
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Debit
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Assets increase with
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Credit
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Liabilities increase with
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Credit
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Common stock increases with
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Debit
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Dividends increase with
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Credit
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Revenues increase with
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Debit
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Expenses increase with
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journal
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gives a complete record of each transaction in one place
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journalizing
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the process of recording transactions in a journal
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posting
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the process from transferring journal entry information to the ledger is called
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general journal
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while company's can use varies types of these, _______. they all have, 1. date of the transaction 2. titles of the affected accounts 3. dollar amount for each debit and credit 4. explanation of the transaction.
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posting reference (PR) column
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a blank line is left between each journal entry for clarity. this is called
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trial balance
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is a list of accounts and their balances. 1 List the account title and its amount (from ledger) in the trial balance . If an account has a zero balance, list it with a zero in its normal balance column. 2. Compute the total of the debit balances and the total credit balances 3. Verify (prove) total debit balances equal total credit balances
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income statement
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this reports the revenues earned less the expenses incurred by a business over a period of time.
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statement of retained earnings
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reports information about how retained earnings charge over time
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balance sheets
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reports the financial position of the company at at a point in time , usually at the end of the month, quarter or year.
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debt ratio
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one way to assess the risk associated with a company's use of liabilities is compute this. Total liabilities/total assests
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Journal Entries, General Ledger, Trial Balance, Income Statement, Statement of Retained Earnings, Balance Sheet, Debit Ratio
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Correct order for the following: (separated by commas) Journal entries, Balance sheet, Trial Balance Statement of retained earnings, Income Statement, General ledger, Debt Ratio
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Assets
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Economic resources that are expected to benefit the business in the future. Receivable
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Liability
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What the business owes. Payable
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Ledger
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The record holding all the accounts of a business, the changes in the accounts, and their balances.
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Normal Balance
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The balance that appears on the increase side of an account.
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Compound journal entry
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A journal entry that is characterized by having multiple debits and/or multiple credits.
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