Account Classification
This account represents money the business OWNS in its cash register
What is cash?
This is the basic accounting equation.
A= L+OE
This is the normal balance side of revenue accounts.
What is credit?
This process records financial transactions in chronological order.
What is journalizing?
A business pays $200 for utilities. Which accounts are affected? (Name both and the direction of change.)
$200 cash decrease (cr)
$200 expense increase (dr)
This account records amounts a business OWES to suppliers.
What is accounts payable or liability?
If Assets= 50,000 and Liabilities= 20,000, solve for OE
OE= 30,000
According to accounting rules, expenses always cause this to happen to Owner’s Equity.
OE goes down / is debited.
This system groups accounts so that each account has its own record of increases and decreases.
What is posting to the ledger?
A customer pays you $1,000 for a service you already performed. Record the type of accounts affected.
$1,000 cash increase (dr)
$1,000 accts. rec. decrease (cr)
This type of account tracks the value of products or services sold to customers.
What is revenue/sales?
Liabilities= 14,000 and OE= 36,000, what is the asset value?
50,000
This rule states revenue should be recorded when it is earned, even if cash is not yet received.
What is the revenue recognition principle?
This accounting form lists all accounts and their balances before adjustments.
What is the Trial Balance?
You purchase equipment for $2,500 on account. Identify what increases and what decreases.
$2,500 equipment increase (dr)
$2,500 accts pay increase (cr)
This account increases owner’s claim to the business when they invest additional funds.
What is Owner's Capital/Equity?
If Assets increased by $6,000 and Owner’s Equity decreased by $1,500, how must Liabilities change to keep the equation in balance?
Liabilities must increase 7,500
Owner’s Equity increases on this side of the T‑account and decreases on the opposite side. Name both.
What is increasing on the credit side and decreasing on the debit side?
This financial statement shows whether a company made a profit or a loss during a period.
What is an income statement?
You earn $3,200 of revenue on account. Later, the customer pays the bill. Identify the accounts involved in BOTH transactions.
$3,200 accts rec increase (dr)
$3,200 revenue (cr)
$3,200 cash increase (dr)
$3,200 accts rec decrease (cr)
Classify this account: Unearned Revenue.
Liability.
A company has beginning Owner’s Equity of $25,000. During the period:
• Owner invests $4,000
• Owner withdraws $6,000
• Net income is $3,500
Calculate the ending Owner’s Equity.
Beginning OE = 25,000
Determine the normal balance AND the increase/decrease rule for ALL of these: Capital, Expenses, Withdrawals, and Revenue.
Capital- Credit
Expense- Debit
Withdrawals- Debit
Revenue- Credit
Place in correct order of preparation:
Balance Sheet, Journalizing, Income Statement, Ledger Posting, Unadjusted Trial Balance.
Journalizing, Ledger Posting, Unadjusted trial balance, Income Statement, Balance Seet.
A business completes the following transactions:
• Invests $10,000 cash
• Provides $6,000 of services (half on account)
• Pays $1,200 for rent
• Pays a $500 liability
• Receives $3,000 from customers on account
Prepare the updated balances for: Assets, Liabilities, and Owner’s Equity.
+10,000 Cash (investment)
+6,000 Revenue (3,000 cash, 3,000 receivable)
–1,200 Rent Expense
–500 Liability Paid
+3,000 Cash from receivables
Final Totals: