Vocabulary
What is the price paid for goods or services used to operate a business, they also decrease the owner's equity in the business?
Expense
What is the basic accounting equation?
Assets = Liabilities + Owner's Equity (A=L+OE)
What side of a T account is always the credit side?
The right side.
Which side is the normal balance side for an asset account?
The debit side.
Classify the following account: Store Supplies
Asset
All accountants use the same set of rules called GAAP, What does GAAP stand for?
Generally accepted accounting principles
The __________ is the relationship between assets and both types of equity.
Accounting equation
What side of a T account is always the debit side?
The left side.
True or False: Debit means the increase side of an account.
False
The business or person selling you property on credit is called a?
Creditor
What is income earned for the sale of goods or services called, it also increases the owner's equity in the business?
Revenue
Finish this statement...For every debit there must be an...
equal credit
What do you call the shaded side of a T account?
The normal balance side, the side used to record increases to the account.
To increase a liability account, which side must you record the transaction on?
The credit (right) side.
To become a CPA, you must pass a national test and meet specified experience and education standards. What does CPA stand for?
Certified Public Accountant
Explain the difference between accounts receivable and accounts payable.
Accounts receivable shows money owed to the business while accounts payable shows money owed by the business.
If a debit was made to one asset account and a credit was made to another asset account would the result cause the basic accounting equation to be out of balance?
No
What are the three basic parts of a T account?
T accounts have a top (title), left side (debit), and right side (credit).
Capital is decreased on which side?
The debit side.
When assigning numbers to accounts in a ledger, what is the typical system for numbering the following accounts: Assets, Liabilities, Owner's equity, Revenue and Expenses?
Asset accounts begin with 1, Liability 2, Owner's equity 3, Revenue 4 and expenses 5.
What is the name of the system of record-keeping in which each business transaction affects at least two accounts?
Double-entry accounting system
Why is a business transaction entered in at least two accounts?
To keep the accounting equation in balance.
Why do accountants use T accounts?
T accounts are used to analyze effects of transactions before recording them.
What is meant by a credit of $500 to Accounts Payable?
Accounts Payable increased by $500.
What are the six steps involved in analyzing a business transaction?
1. identify accounts affected. 2. Classify accounts affected. 3. Determine amount of increase or decrease for each account. 4. Which account is debited, for what amount? 5. Which account is credited, for what amount? 6. What is the complete entry in T account form?