CH 1 & 2
What is the accounting equation?
Assets = Liabilities + Owner's Equity
OR
Owners Equity = Assets - Liabilities
Which account is debited and which account is credited in the following transaction: The business received cash from sales.
Debit: Cash
Credit: Sales
A check with a future date is considered a _____ .
Postdated Check
A financial statement that reports assets, liabilities, and owner's equity:
Balance Sheet
The same accounting principles must be followed in the same way in each accounting period.
Consistent Reporting
What are the 5 account classifications?
Assets, Liabilities, Owners Equity, Revenue, Expenses
Which account is debited and which account is credited in the following transaction: The business purchased supplies from Staples on account.
Debit: Supplies
Credit: Accounts Payable - Staples
When journalizing establishing a Petty Cash Fund what accounts are debited and credited?
Debit: Petty Cash
Credit: Cash
A financial statement showing the revenue and expenses for a fiscal period:
Income Statement
Financial statements contain all information necessary to understand a business’s financial condition.
Full Disclosure
What is the normal balance of an expense account?
Debit
Which account is debited and which account is credited in the following transaction: The business owner withdrew cash for personal use.
Debit: Owner's Drawing
Credit: Cash
The length of time for which a business summarizes and reports financial information is called _____.
Fiscal Period
The difference between total revenue and total expenses when total expenses are greater
Net Loss
The revenue from business activities and the expenses associated with earning that revenue are recorded in the same accounting period.
Matching Expenses with Revenue
The amount recorded on the left side of a T-account?
Debit
What is the last step in the posting process?
Recording the Post Ref. (general ledger account number) in the journal.
A proof of equality of debits and credits in a general ledger is called a ____ .
Trial Balance
What is the normal balance of income summary when the business has a net income?
Credit Balance
Revenue is recorded at the time goods or services are sold.
Realization of Revenue
Which 2 accounts are affected when an owner withdraws cash for personal use?
Debit: Owner's Equity
Credit: Cash
List the 5 account classifications with the correct account numbering system (the first digit of the account number):
100 - Assets
200 - Liabilities
300 - Owners Equity
400 - Revenue
500 - Expenses
When journalizing a Bank Service Charge what accounts are debited and credited:
Debit: Miscellaneous Expense
Credit: Cash
How is the final balance of the Owner's Capital determined on the statement of owner's equity?
Starting Capital
+ Net Income or - Net Loss
- Owner's Drawing
= Ending Capital
What are the 8 steps in the accounting cycle for a sole proprietorship service business:
1. Source Documents & Debits/Credits
2. Journalize
3. Post to General Journal
4. Work sheet & Trial Balance
5. Journalize/Post Adjusting Entries
6. Financial Statements
7. Journalize Post Closing Entries
8. Post-Closing Trial Balance