Definitions
What is an asset?
Something of value owned by a business
What is the basic accounting equation?
Assets = Liabilities + Owner's Equity
What two categories would this transaction belong to? Remember to say adding or subtracting.
Adam bought computer equipment on account.
Add to Equipment and Add to Liability
What are the three financial statements we practice preparing?
Income Statement, Statement of Owner's Equity, and Balance Sheet
What side of the T Account are debit and credit?
Debit = Left
Credit = Right
What is a liability?
Obligations that you still owe for your business.
How do we know we have all of our transactions on the correct side of the equation?
When correct, the equation will be "balanced" or equal on both sides.
What two categories would this transaction belong to? Remember to say adding or subtracting.
Lindsay made $5,000 from services her lawncare company performed.
Add to Cash and Add to Revenue
Which financial statement contains revenues and expenses?
Income Statement
What has to happen to each transaction when putting them into T Accounts?
Transactions have to be placed in two categories, once on the left (debit) and once on the right (credit)
What is capital?
The owner's investment of equity (money) into a company.
Which two categories are subtracted in the expanded accounting equation?
Withdrawals and Expenses
What two categories would this transaction belong to? Remember to say adding or subtracting.
Max billed his clients $1,000 for work he completed for them, but he has not received payment yet.
Add to Accounts Receivable and Add to Revenue
Which financial statement gets prepared last?
Balance Sheet
What do you do when there is only value on one side of your T Account at the end of your transactions?
That value gets moved without changing and becomes the end balance.
How is cash different from capital?
Cash can only be "liquid" money, whereas capital can be represented in money, or other assets (equipment, etc.)
What does it mean to keep a running balance when putting transactions into the accounting equation?
It means you do you calculations as you go through each transaction so you keep track of the balance throughout.
What two categories would this transaction belong to? Remember to say adding or subtracting.
Abbie used $700 to pay her own personal phone bill.
Subtracting from Cash and Adding to Expenses
How do you write the heading of a financial statement?
Top - Business Name
Middle - Financial Statement Name
Bottom - Date
What is the footing of the T Account?
Where you total each respective of the T Account before calculating the end balance.
What is a trial balance?
List of all ending balances from a ledger (T Accounts). Credits and Debits should be equal.
What is the expanded accounting equation? Include all of the categories.
Assets (Cash+Equipment+Accounts Receivable)=Liabilities (Accounts Payable) + Owner's Equity (Capital) + Revenue - Expenses - Withdrawals
What two categories would this transaction belong to? Remember to say adding or subtracting.
Tyler made a partial payment of $500 to pay off equipment he bought on account.
Subtract from cash and subtract from Accounts Payable
Which category/balance carries over from each statement? One from Income Statement to SOE and one from SOE to Balance Sheet.
Net Income - Income to SOE
Capital - SOE to Balance Sheet
How do you calculate the end balance? Which side of the T Account does it go on?
You calculate the end balance by subtracting the lesser footing amount from the greater footing amount. The end balance stays on the side of the greater amount of the T Account.