Equity
What is revenue?
Income, related to the sale of goods or services.
How are journal entries entered into the journal?
In chronological order by date as transactions occur.
What do 'debit' & 'credit' mean?
Credit = Right
What is sales tax?
Tax dollars generated from business transactions.
A seller
What is the equity equation for net income?
Beginning Capital + Net Income - Drawings = Ending Capital
What is the reason for cross-referencing?
When your company makes a sale, do you debit or credit the revenue account? Why?
Credit, because credit means increase for equity accounts.
What does remittance mean?
A sum of money sent.
What are the first four steps in the accounting cycle?
2. Accounting entries are recorded in the journal
3. Journal entries are posted to ledger accounts
4. Ledger is balanced by a Trial Balance
What is an expense?
A decrease in equity due to the costs of operating a business.
Why do accountants work to a high degree of accuracy?
When your company has an expense, is it recorded as a debit or a credit entry in the journal and ledger? Why?
Debit, because debit means decrease for equity accounts.
Why do banks issue bank advices?
To tell clients about transactions and account activities that affect their bank balance.
PST collected from customers is recorded in what type of account?
Liability account
What is the bottom line?
Total Income, Profit
If a trial balance difference is a multiple of 10, what error has likely been made?
An error in addition.
Are drawings recorded as a debit or credit entry in the journal and ledger? Why?
Debit, because debit means decrease for equity accounts.
1. PST is collected by the seller and recorded in the ledger as PST expenses.
2. The purchaser pays a flat rate of $5 per transaction for PST.
3. The purchaser does not do special accounting for PST.
4. PST that is collected by the seller is kept for their personal use as drawings.
What two accounts are recorded on the Income Statement?
What is the equity equation for net loss?
Beginning Capital - Net Loss - Drawings = Ending Capital
What is posting?
The process of transferring information from the journal to the ledger.
Explain how debit and credit theory is different for assets, liabilities and equity.
Assets: Debit Increases; Credit Decreases
Liabilities & Equity: Debit Decreases; Credit Increases
What do governments use taxes for?
To fund important services, such as healthcare, education, and social assistance programs.
Give 3 examples of source documents.
Cash Sales Slip
Sales Invoice
POS Summary
Purchase Invoice
Check Copy
Cash Receipts Daily Summary
Bank Advices