Accounting Chapter 2

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Author:
neKen
ID:
238298
Filename:
Accounting Chapter 2
Updated:
2013-10-02 00:46:09
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Accounting
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Description:
Chapter 2: Reporting Investing and Financing Results on the balance sheet
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  1. 2 source of financial activities are?
    • Equity: Issue stock
    • Debt: Obtain loan and bank
  2. Investing activities of assets
    Can be obtain by cash or on account; require to operate the business
  3. Investing activities of external/internal
    • External exchange: Asset/Liability/Shareholder equity between the company and someone else
    • Internal events: occur within the company, by using assets to create an inventory product
  4. Apply transaction analysis
    Analyze -> Record -> Summarize
  5. Duality of effects
    Transaction has at least 2 effects on the basic accounting equation
  6. Chart of accounts
    Summary of all account used to record financial results
  7. Exchange of only promises a transaction?
    No, it does not affect the accounting equation
  8. Journal
    record the effect of each day's transaction; organized by date
  9. Ledgers
    Summarize the effects of journal entries on each account; organized by account
  10. Debit/Credit of Asset = Liability + Shareholders' Equity
    Asset: (DR+/CR-) = Liability: (DR-/CR+) + Shareholders' Equity (DR-/CR+)
  11. Journal Entries
    Record transaction and indicate the effects in a debits-equal-credit format
  12. T-accounts
    Simplified version of a ledger account used for summarizing the effects of journal entries
  13. Trial Balance
    Internal report that lists all accounts and their balances, and provides a check on debits=credits
  14. Classified balance sheet
    shows subtotals for current assets and current liabilities
  15. Current Assets
    used up or converted into cash within 12 months
  16. Current Liabilities
    obligation that will be paid/settle/fulfilled within 12 months
  17. Non current or Long-term
    Assets/ liabilities that are longer than 12 months
  18. Current Ratio
    Show whether current assets are sufficient to pay current liabilities - higher the ratio mean better ability to pay
  19. Current Ratio Equation
    Current Ratio = Current Assets/Current Liabilities
  20. Balance sheet concepts and values
    • - Report what a company own and owes
    • - does not show the company is worth
    • - recorded at cost

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