The Accounting Equation
What are Assets?
Assets are the property a business owns
What side does a debt go on?
A debt is an entry on the left side of an account
What is Journalizing Transactions?
The systems by which all business transactions are recorded for your financial records.
What are the 5 basic financial statements?
Income statement, Cash flow statement, statement of changes in equity, balance sheet, and note to financial statements.
What is a General Ledger?
A permanent classified record of all accounts used in the a firms operation or a record of final entry
What are Liabilities?
Liabilities are the debts of the business
What side does a credit entry go on?
A credit entry goes on the right side of an account
What does journaling mean in Accounting?
It is a book of raw transactions recorded in chronological order by date.
What is the main purpose of financial statements?
A statement to test the accuracy of total debits and credits after transactions have been recorded
Trial Balance
What is the Owner's Equity?
The Owner's Equity is the owner's financial interest in the business
How many debits and credits does every transaction in a double entry accounting system have?
It has at least one debit and one credit.
What do you need to include in a Journal Entry?
The date of the transaction, the account name and number for each account impacted, and the credit and debit amount.
What is the meaning of Financial Statements?
They are written records that convey the business activities and the financial performance of a company.
What is Footing?
A small pencil figure written at the base of an amount column showing the sum of the entries in the column
What does the Accounting Equation do?
The Accounting Equation shows the relationship between a company's assets, its debts, and the owner's equity.
The total of debits and credits recorded in the separate accounts must be what?
Equal
Is bookkeeping the same as journaling?
Journal entries are not a bookkeeping system.
What is needed for a financial statement?
The income statement and the balance sheet.
A Journal Entry that contains more than one credit and one debit
Compound Entry
What is the Accounting Equation?
Assets = Liabilities + Owner's Equity
What does a credit do?
Credits decrease assets and increase liabilities or equity.
What is the first step in the journalizing process?
Read and understand the transaction
Who prepares financial statements?
Directors
A special type of owner's equity account set up to record the owner's withdrawal of cash from the business
A drawing Account