Accounting Chapters 1 and 2

Random

100

What is the accounting equation?

Assets= Liabilities+ Owner's Equity

200

What does the account equation have to be on both sides?

Equal

300

What does it mean when something is bought on account?

The customer did not pay for the item right away, but he/she will eventually make a payment for the item/service.

400

What does it mean when a business does not hold personal liability?

If the business is sued, the owner's personal assets cannot be taken. (house, car, etc...)

500

List the normal balance for every category of account

Asset- Debit 

Liability- Credit 

Capital- Credit 

Drawing- Debit 

Revenue- Credit 

Expenses- Debit 

Categorizing Accounts

100

Cash

Asset 

200

Fees earned 

Owner's Equity 

300

Capital

Owner's Equity 

400

Accounts Payable 

Liability 

500

Accounts Receivable 

Asset 

Vocabulary

100

Manufacturing Business

A business that creates tangible items 

200

Generally Accepted Accounting Principles. (GAAP)

A set of rules and guidelines used by financial accountants when preparing reports

300

Corporation 

A company that is ran by a board of directors and sells stocks

400

Fiscal year

The calendar year chosen by a company 

500

Double Entry Accounting System 

At least 2 accounts are effected in every journal entry

Journal Entries 1

100

Harry bought $320 worth of office equipment with cash. 

Debit office equipment for $320 

Credit cash for $320

200

Joe bought $110 worth of supplies on account. 

Debit supplies for $110 

Credit accounts payable for $110 dollars 

300

A customer paid 150 dollars for supplies that they previously bought on account. 

Debit fees earned for 150 

Credit accounts receivable for 150 

400

What is the journal entry a company records when paying $6,000 for this months rent?

Debit rent expense for 6,000
Credit cash 6,000

500

The owner of a company withdraws $700 to go on vacation. 

Debit drawing for $700 

Credit cash for $700

Journal Entries 2

100

Wilson Group purchased $400 dollars worth of office equipment on account.

Debt office equipment for $400 

Credit accounts payable for $400 

200

Great Clips provided a customer with a $20 dollar haircut on account. 

Debit accounts receivable for $20 

Credit fees earned for $20  

300

Ben invests $20,000 back into his business. 

Debit cash for $20,000

Credit capital for $20,000

400

Mary paid David $600 for supplies that she recently bought on account.

Debit accounts payable for $600 

Credit cash for $600

500

Penelope paid $2,540 worth of wages. 

Debit wages expenses $2,540

Credit cash for $2,540