Accounting 201 Ch 2

Front 1

Transaction

Back 1

Any event that has a financial impact on the business and can be measure reliably. (sells merchandise, borrow money, repay loan, etc.)

Front 2

Two sides of transaction

Back 2

1. Give something
2. Receive something in return
ALWAYS record BOTH sides

Front 3

Account

Back 3

record of all changes in a particular asset, liability, or stockholders' equity during a period. The basic summary device of accounting.

Front 4

Cash

Back 4

money and any medium of exchange (bank account balances, paper currency, coins, certificate of deposit, and checks.

Front 5

Account Receivable

Back 5

companies sells its goods and services and receives a promise for future collection of cash.

Front 6

Notes Receivable

Back 6

More formal way of a customer promising to pay. It is more binding because the customer signed the note

Front 7

Accounts Payable

Back 7

Promise to pay a debt arising from a credit purchase of inventory

Front 8

Notes Payable

Back 8

Business signs a note promising to pay. Also carries interest.

Front 9

Accrued Liabilities

Back 9

expense you have not yet paid. (interest payable, salary payable, income tax payable)

Front 10

Common Stock

Back 10

Most basic element of equity.

Front 11

Retained Earnings formula

Back 11

Revenue – Expense – Dividends = Net income/ Net loss

Front 12

Income Statement appears as ___ and ___ on ____

Back 12

Revenue, expenses, retained earnings

Front 13

Cash Receipt

Back 13

Increase cash

Front 14

Cash Payments

Back 14

Decrease cash

Front 15

Where does the data for the statement of cash flows align under

Back 15

Cash account

Front 16

Debit

Back 16

goes on the left side

Front 17

Credit

Back 17

Goes on the right side

Front 18

Double-entry Accounting

Back 18

Every transaction affects at least two accounts
at least a debit and a credit

Front 19

Increase asset

Back 19

Debit

Front 20

Decrease asset

Back 20

Credit

Front 21

Increase liabilities

Back 21

Credit

Front 22

Decrease liabilities

Back 22

Debit

Front 23

Increase stockholder's equity

Back 23

Credit

Front 24

Decrease Stockholder's equity

Back 24

Debit

Front 25

T-account

Back 25

method of recording transactions and keeping track of the dollar amount in particular account.

Front 26

Fra Luca Pacioli

Back 26

father of Accounting

Front 27

Debit increases

Back 27

expenses, dividends, assets

Front 28

Credit increases

Back 28

common stock, retained earnings, revenue, liabilities

Front 29

Journal

Back 29

Chronological record of transactions that impact the financial position of a business

Front 30

Three steps of the journalizing process

Back 30

1.Identify accounts impacted by transaction
2.Apply debit/credit rules to increase or decrease the accounts
Remember - have at least one debit and one credit
3.Record transaction in the journal

Front 31

Journalizing

Back 31

Write the account debited first
and the amount in the left column

Write (and indent) the account credited next and the amount in the right column

Front 32

Posting

Back 32

Transferring information
from the journal to the ledger

Front 33

Ledger

Back 33

a collection of accounts and their balances

Front 34

Journal is also known as

Back 34

Book of original entry

Front 35

Ledger

Back 35

grouping of all T-accounts

Front 36

Posting

Back 36

the process of copying data to the ledger

Front 37

Flow of accounting data

Back 37

Transaction occurs → Transaction analyzed → Transaction entered in journal → Amounts posted to the Ledger Accounts

Front 38

Trial Balance

Back 38

Lists all accounts with their balances- assets first, then liabilities, and stockholders' equity. Shows the total debits equal total credits.

Front 39

The Trial Balance facilitates....?

Back 39

The preparation of the financial statements.

Front 40

3 Steps to finding an error

Back 40

1. Search the records for a missing account
2. Divide the out-of balance amount by 2
3. Divide the out balance amount by 9. If the result is an integer (no decimals), the error may be a
1. Slide (writing $400 as $40) the out balance would be (400-40= 360) dividing $360 (the out balance) by 9 gives $40- the error.
2. Transposition- (writing $2100 as $1200). The out balance would be $900 (2100-1200). Dividing by 9 gives $100.

Front 41

Balance Sheet Accounts (Ledger) has

Back 41

Assets, liabilities, and stockholders equity

Front 42

Chart of Accounts

Back 42

Used to list their accounts and account numbers
1. Assets
2. Liabilities
3. Stockholders Equity
4. Revenue
5. Expenses

Front 43

Normal Balance

Back 43

falls on the side of the account (debit or credit) where increases are recorded. (Debit balanced accounts, credit balanced accounts)

Front 44

Accrued Liability

Back 44

a liability of an expense not yet paid by the company