Accounting Basics
This is the accounting equation that forms the foundation of all accounting systems.
Assets = Liabilities + Equity
This statement shows a company’s financial position at a specific point in time.
Balance Sheet
In a journal entry, this account is debited when cash is received.
Cash/Bank
A trial balance is prepared to ensure these two totals match.
Debits and Credits
True or False: An Accounts Payable account will normally have a credit balance
True
This type of account records money owed by customers.
Accounts Receivable
This section of the cash flow statement shows cash generated from a company’s regular business activities.
Operating expenses
This is the first step in the accounting cycle.
Journalizing Transactions
This is the first step in preparing a trial balance.
List All Account Balances
This type of account typically has a debit balance.
Assets
This principle requires accountants to record expenses when they are incurred, regardless of when payment is made.
Matching Principle
The net income or loss from the income statement flows into this section of the balance sheet.
Retained Earnings
If a company pays rent, this account is debited.
Rent Expense
An error in a trial balance occurs if the totals of these do not match.
Debit and Credit Columns
The term for transferring journal entries to the ledger is this.
Posting
This document lists all accounts used by a business and their account numbers.
Chart of Accounts
This financial statement shows the revenues and expenses over a period of time
Income Statement
When inventory is purchased on credit, this account is credited.
Accounts Payable
If an amount is recorded in the wrong account but in the correct debit or credit column, it is this type of error.
Classification Error
A post-closing trial balance is prepared.
If the transaction involves a sales invoice, the account that is always debited is
Accounts Receivable
This term refers to the process of allocating the cost of a tangible asset over its useful life.
Depreciation
This is the entry to record depreciation for the year.
Debit Depreciation Expense, Credit Accumulated Depreciation
True or false: The Supplies account gets closed to a zero balance at the end of the fiscal period.
False
This is the formula to calculate net income
Revenue minus Expenses