Chart of Accounts
What does the first digit of a 3-digit account number represent?
The general ledger division. (1–Assets, 2–Liabilities, 3–OE, 4–Revenue, 5–Expenses)
What is the purpose of the Post. Ref. column?
To show where the entry came from and where it was posted.
What are the two steps to opening an account?
Write the account title & write the account number.
What source document is used for a correcting entry?
A memorandum.
What is proving cash?
Comparing the Cash account balance to the checkbook balance.
How are asset accounts listed in the Chart of Accounts?
In order of liquidity.
How many steps are in posting?
Five steps.
What is file maintenance?
Arranging accounts, assigning account numbers, and keeping them current.
If an error is discovered before posting, how do you correct it?
Cross out and write the correct info above.
What are the 4 steps of recording a transaction in the general journal?
Date, account titles, debit/credit amounts, source document.
What do the second and third digits of an account number represent?
The location of the account within its division.
What is Step 5 of posting?
Return to the journal and write the account number.
Which division uses account numbers in the 300s?
Owner’s Equity.
If a $450 debit was posted as $45, what’s the first step to correct it?
Draw a line through the incorrect amount
Receipts, T-tapes, checks, and memos are examples of what?
Source documents
Where do Accounts Receivable go in the Chart of Accounts?
Under Assets, listed alphabetically by last name.
If a debit is posted to an asset account, what happens to the balance?
It increases (debit = normal balance).
What do you call the ledger that contains all accounts needed for financial statements?
The General Ledger.
If an amount was posted to the wrong account, what must be done?
Draw a line through the incorrect entry, post to the correct account, recalc the balance.
Sales increases which type of account?
Revenue (normal credit balance).
If Miscellaneous Expense is 530 and Rent Expense is 540, what number would be assigned to Postage Expense?
535 (because expenses are alphabetical and you average the numbers).
What determines whether an account balance ends as a debit or credit?
Whichever side has the larger total — debits or credits.
If you add a new Accounts Payable vendor alphabetically between two others, how do you determine the number?
Assign the number between the two existing account numbers.
If a debit entry was accidentally posted as a credit, how do you correct it?
Line through the incorrect item, post in correct column, recalc balance.
If the Cash account balance in the books is $4,550 but the checkbook shows $4,525, is cash proved?
No — the balances must match exactly. (Proving Cash rule)