Chapter 1
What is the definition of accounting?
The process of planning, recording, analyzing, and interpreting financial information
What must both the sides of the accounting equation do?
They must balance
What must be true of the accounting equation after each transaction is recorded?
It must be balanced on the left and right side
What basic accounting device is used to help analyze transactions?
T account
What is a form for recording transactions in chronological order?
Journal
What are 3 job opportunities in accounting?
1. Financial Clerk
2. Bookkeeper
3. Auditor
4. Actuary
5. Forensic Accountant
6. Certified Public Accountant
A business own ed by one person
Proprietorship
An increase in owner's equity resulting from the operation of a business is what?
Revenue
What is an account that reduces a related account on a financial statement?
Contra account
What are the five amount columns in the journal?
General Debit, general Credit, Sales credit, Cash debit, Cash credit
What is a business that performs an activity for a fee?
Service Business
What is the Equation?
assets = Liabilities + Owners Equity
What are four expense transactions other than rent and utilities?
Revenue, Capital, expenses, and drawing
On which sides of a T account are increases and decreases recorded for asset account? For liability accounts? For the capital account?
Assets increase on the left and decrease on the right. Liability and capital accounts decrease on the left and increase on the right.
What two journal amount columns are used to record cash received from sales?
Cash, Sales
What is a financial reports that summarize the financial condition and operations of a business
Financial statements
Supplies, Cash, and Prepaid insurance are all
Assets
What accounts are affected, and how, when an owner withdraws $500.00 for personal use?
Assets and Owner's Equity
What is the relationship between total debits and total credits in accounting records?
They are equal
What are the four parts of a journal entry
Date, debit, credit, Source of Document
What is a planned process for providing financial information that will be useful to management
Accounting system
What three things do you put at the top of a balance sheet?
Name of Company, Balance Sheet, Date
What transactions decrease owner’s equity?
Expenses and Withdrawals
What is the normal balance side of an asset account? Of a liability account? Of a capital account?
Normal balance side for asset account is left. Normal balance side for liability and capital is the right side.
What is a form of which s brief message is written describing a transaction?
memorandum