Accounting Chapter 2
Card Set Information
Accounting Chapter 2
For accounting class
What is the definition of an account?
It is used to record increases and decreases of business transactions relating to individual assets, liabilities, capital, withdraws, revenue, and expenses.
What is the standard account?
A formal account includes columns for the date, explanation, posting reference, debit, and credit.
What is a ledger?
A group of accounts that records data from business transactions.
What is the T account?
A skeleton version of the standard account, used for demonstration purposes.
What is the definition of a debit?
It is the left-hand side of any account.
What is the definition of a credit?
It is the right-hand side of any account.
What is the definition of a footing?
A footing is the totals of each side of a T account. Footings help in calculating the new (or ending) balance...whichever side (debit or credit) that has the higher balance of the two.
What is the ending balance?
The difference between footings in the T account.
What is the chart of accounts?
A numbering system of accounts that lists the account titles and account numbers. It allows accounts to be located quickly.
What are the five steps in the transaction analysis?
1. Determine which accounts are affected.
2. Determine which categories the accounts belong to.
3. Determine whether the accounts increase or decrease.
4. What do the rules of debit and credit say?
5. What does the T account look like?
Which three account categories, when debited, increase?
Assets, withdraws, and expenses.
What is a compound entry?
A transaction involving more than one debit or credit.
What is the definition of double-entry bookkeeping?
The recording of each transaction affects two or more accounts and the total of the debits is equal to the total of the credits.
On which statement do withdrawals go? Expenses?
: statement of owner's equity
: income statement.
What does a withdrawal do?
An increase in withdrawals is a debit while a decrease in cash is a credit.
What is the purpose of a footing?
To obtain the totals (ending balance (of each side of every T account that has more than one setting. It is not a financial statement though it is used to prepare one.
What is the definition of a trial balance?
It is a list of the ending balances of all the accounts in a ledger. The total of the debits should equal the totals of the credits.
What is the definition of the normal balance of an account?
It is the side of an account that increases by the rules of debit and credit.