Accounting Basics
What is the main purpose of a trial balance?
To check that total debits equal total credits.
Which side increases an asset account?
Debits.
What’s the first step when your trial balance doesn’t balance?
Recheck your addition of debit and credit columns.
What’s missing if the total if assets = $10,000 and liabilities = $6,000?
Owner’s Equity = $4,000.
What’s the effect of forgetting to post one side of a transaction?
The trial balance will not balance
What are the five main types of accounts in accounting?
Assets, Liabilities, Owner’s Equity, Revenue and Expenses.
Which side increases a liability account?
Credits.
What kind of error occurs when digits are reversed (e.g., $54 written as $45)?
Transposition error.
You debit $500 to Cash instead of Credit — what’s the total error difference?
$1,000 difference.
What’s the term for the left-hand side of a T-account?
Debit side.
What does it mean if the trial balance doesn’t balance?
There’s an error in recording or posting transactions.
If you pay cash for supplies, what accounts are affected?
Supplies (debit), Cash (credit).
If the trial balance is off due to an incorrectly placed decimal, what kind of error might it be?
Slide or transposition error.
You see revenue of $450 is recorded as $540, what type of error occurred?
What happens if a transaction is recorded twice?
The affected accounts will be overstated.
What is the accounting equation?
Assets = Liabilities + Owner’s Equity.
What type of balance does an expense account normally have?
Debit balance.
What’s an omission error?
When a transaction is completely left out of the books.
You see that rent expense is recorded as a revenue- what error occurred?
Classification error.
What are T-accounts used for in accounting?
To show increases and decreases in each account.
What two financial statements are prepared using the trial balance?
Income Statement and Balance Sheet.
How does making a sale to a customer on credit affect the accounts?
Accounts Receivable ↑ (Debit), Revenue ↑ (Credit).
What happens if you debit an account that should’ve been credited?
The trial balance will be out of balance by double the amount of the error.
The trial balance totals $22,000 (debit) and $21,500 (credit). What’s the best way to find the error?
Find a $500 error by checking for a transaction recorded on one side only or misposted by $250.
What happens if a transaction is recorded in the wrong account but correct side?
The trial balance still balances but information is inaccurate.