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44 Cards in this Set

  • Front
  • Back
Any event that has a financial impact on the business and can be measure reliably. (sells merchandise, borrow money, repay loan, etc.)
Two sides of transaction
1. Give something
2. Receive something in return
ALWAYS record BOTH sides
record of all changes in a particular asset, liability, or stockholders' equity during a period. The basic summary device of accounting.
money and any medium of exchange (bank account balances, paper currency, coins, certificate of deposit, and checks.
Account Receivable
companies sells its goods and services and receives a promise for future collection of cash.
Notes Receivable
More formal way of a customer promising to pay. It is more binding because the customer signed the note
Accounts Payable
Promise to pay a debt arising from a credit purchase of inventory
Notes Payable
Business signs a note promising to pay. Also carries interest.
Accrued Liabilities
expense you have not yet paid. (interest payable, salary payable, income tax payable)
Common Stock
Most basic element of equity.
Retained Earnings formula
Revenue – Expense – Dividends = Net income/ Net loss
Income Statement appears as ___ and ___ on ____
Revenue, expenses, retained earnings
Cash Receipt
Increase cash
Cash Payments
Decrease cash
Where does the data for the statement of cash flows align under
Cash account
goes on the left side
Goes on the right side
Double-entry Accounting
Every transaction affects at least two accounts
at least a debit and a credit
Increase asset
Decrease asset
Increase liabilities
Decrease liabilities
Increase stockholder's equity
Decrease Stockholder's equity
method of recording transactions and keeping track of the dollar amount in particular account.
Fra Luca Pacioli
father of Accounting
Debit increases
expenses, dividends, assets
Credit increases
common stock, retained earnings, revenue, liabilities
Chronological record of transactions that impact the financial position of a business
Three steps of the journalizing process
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
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
Transferring information
from the journal to the ledger
a collection of accounts and their balances
Journal is also known as
Book of original entry
grouping of all T-accounts
the process of copying data to the ledger
Flow of accounting data
Transaction occurs → Transaction analyzed → Transaction entered in journal → Amounts posted to the Ledger Accounts
Trial Balance
Lists all accounts with their balances- assets first, then liabilities, and stockholders' equity. Shows the total debits equal total credits.
The Trial Balance facilitates....?
The preparation of the financial statements.
3 Steps to finding an error
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.
Balance Sheet Accounts (Ledger) has
Assets, liabilities, and stockholders equity
Chart of Accounts
Used to list their accounts and account numbers
1. Assets
2. Liabilities
3. Stockholders Equity
4. Revenue
5. Expenses
Normal Balance
falls on the side of the account (debit or credit) where increases are recorded. (Debit balanced accounts, credit balanced accounts)
Accrued Liability
a liability of an expense not yet paid by the company