The Equation ($A = L + OE$)
If a business has $50,000 in assets and $20,000 in debt, this is the total value of the owner's claim.
What is $30,000 (Owner's Equity)
This is the "normal balance" side (left or right) for any Asset account.
What is the Left (Debit) side?
You receive this document when you buy supplies from a vendor but don't have to pay them until next month.
What is a Purchase Invoice?
This occurs when a business's total expenses are higher than its total revenue.
What is a Net Loss?
This is the primary reason an accountant prepares a Trial Balance.
What is to check the mathematical accuracy of the Ledger?
This term describes how quickly an asset, like Cash or Accounts Receivable, can be turned into money
What is Liquidity?
To record an increase in a Liability or a Revenue account, you must do this.
What is Credit the account?
This is the document your business issues when a customer buys a service but will pay you in 30 days.
What is a Sales Invoice?
This accounting principle states that expenses must be recorded in the same period as the revenue they helped generate.
What is the Matching Principle?
If a $100 debit was accidentally posted as a $100 credit, the Trial Balance would be out of balance by this amount.
What is $200?
This specific financial statement shows the company's financial position on one specific date.
What is the Balance Sheet?
This specific equity account is an exception and is increased with a Debit entry because it reduces the owner’s claim.
What are Drawings?
This book is known as the "Book of Original Entry" because it’s where transactions are recorded first.
What is the General Journal?
These types of accounts (Revenue and Expenses) are considered "Temporary" because they are eventually closed out to Capital.
What are Income Statement accounts?
This is the correct order of the first three steps in the accounting cycle.
What is 1. Analyze Source Docs, 2. Journalize, 3. Post to Ledger?
This is the effect on the equation when a business buys a truck using a mix of cash and a bank loan.
"Assets increase and Liabilities increase"?
When a business pays its hydro bill, this account is Credited.
What is the Bank (or Cash) account?
This is the process of transferring information from the Journal into the individual accounts in the Ledger.
What is Posting?
Recording a cash sale by debiting Bank and crediting Accounts Payable is an error that will result in this account being understated.
What is Owner’s Equity (or Revenue)?
If a transaction is completely omitted from the journal, the Trial Balance will still do this.
What is Balance (even though it is incorrect)?
Calculating the "Ending Capital" requires adding Net Income to Beginning Capital and then subtracting this.
What are Drawings?
A "Compound Entry" refers to a journal entry that includes this.
What are more than two accounts?
This document serves as proof for a cash withdrawal made by the owner.
What is a Cheque Copy?
If Capital was $43,000 at the start of the year and $40,400 at the end, and the business lost $1,000, these were the total Drawings.
What is $1,600?
This error occurs when a debit is made to the correct type of account (e.g., an Asset) but the wrong specific account (e.g., Supplies instead of Equipment).
What is an Error of Commission?