Fundamental Accounting Principles (Chapter 2)

Front 1

Source Documents

Back 1

identify and describe transactions and events entering the accounting process.

Front 2

account

Back 2

is a record of increases and decreases in a specific asset, liability, equity, revenue or expense item.

Front 3

general ledger

Back 3

(ledger) is a record containing all accounts used by a company.

Front 4

asset accounts

Back 4

assets are resources owned or controlled by a company and that have expected future benefits.

Cash, note receivable, prepaid accounts, supplies, equipment, buildings, land

Front 5

liability accounts

Back 5

liabilities are claims by creditors on asset.

accounts payable, notes payable, unearned revenue, accrued liabilities.

Front 6

unearned revenue

Back 6

refers to a liabillity that is settled when a company delivers its product or services

Front 7

accrued liabilities

Back 7

are amount owed that are not yet paid.

Front 8

Equity accounts

Back 8

the owner's claim on a company's asset.

Investments, revenues, expenses, withdrawals

Front 9

Chart of Accounts

Back 9

lis of all ledger accounts and includes an identification number assigned to each account.

Front 10

T account

Back 10

represents a ledger account and is a tool used to understand the effects of one or more transactions.

Front 11

Debit

Back 11

Left side DR

Front 12

Credit

Back 12

right CR

Front 13

Double Entry accounting

Back 13

at least two accounts are involved

the total amount debited must equal total amount credited.

the accounting equation must not be violated.

Front 14

journal

Back 14

gives complete records of each transaction in one place.

Front 15

journalizing

Back 15

process of recording transaction in a journal.

Front 16

posting

Back 16

process of transferring journal entries to a ledger.

Front 17

Concepts to analyzing and recording transactions.

Back 17

1. indentify the transaction and any source documents

2. analyze the transaction using the accounting equation

3. record the transaction in journal entry from applying double entry accounting

4. post the entry

Front 18

trial balance

Back 18

a list of accounts and their balances at a point in time.

Front 19

How to prep a trial balance.

Back 19

1. list each account title and its amount (from ledger) in the trial balance. If account has a zero balance, list it with a zero in its normal balance column (or omit entirely)

2. compute the total of debit balances and the total of credit balances.

3. verify total debit balances equal total credit balances.

Front 20

Debt ratio

Back 20

= total liabilities/total assets

way to assess risk associated with a company's use of liabilities