Financial Accounting Chapter 2

56 terms by ElenaWashington 

Create a new folder

Advertisement Upgrade to remove ads

Transaction Analysis

A _____ is any event that has a financial impact on the business and can be measured reliably.

Transaction

Every transaction has two sides: you _____ something and you _____ something

Give; receive

The accounting equation is:

Assets = Liabilities + Stockholders' Equity

An _____ is the record of all the changes in a particular asset, liability, or stockholders' equity during a period.

Account

_____ are economic resources that provide a future benefit for a business.

Assets

_____ means money and any medium of exchange including bank account balances, paper currency, coins, certificates of deposit, and checks.

Cash

Assets, cash, accounts receivable, notes receivable, inventory, prepaid expenses, land, buildings, equipment, furniture, and fixtures, liabilities, accounts payable, notes payable, accrued liabilities, stockholders' equity, retained earnings, dividends, revenues, expenses, and common stock are considered _____.

Accounts

Companies sell their goods and services and receive a promise for future collection of cash. The _____ _____ account holds these amounts.

Accounts receivable

A _____ _____ is similar to an account receivable, but a _____ _____ is more binding because the customer signed it. It usually specifies an interest rate.

Note receivable

A _____ _____ is an asset because the payment provides a future benefit for the business.

Prepaid expense

True or false: notes payable and notes receivable carry interest

True

An _____ _____ is a liability for an expense you have not yet paid.

Accrued liability

The owners' claims to the assets of a corporation are called _____ _____.

Stockholders' equity

The _____ _____ account shows the owners' investment in the corporation.

Common Stock

What can increase stockholders' equity?

Sale of stock and net income

What can decrease stockholders' equity?

Dividends and net loss

The _____ _____ account shows the cumulative net income earned over the company's lifetime, minus its cumulative net losses and dividends.

Retained Earnings

Dividends indicate a _____ in Retained Earnings.

Decrease

The increase in stockholders' equity from delivering goods or services to customers is called _____.

Revenue

The cost o operating a business is called an _____.

Expense

Expenses _____ stockholders' equity.

Decrease

Total assets must always equal total liabilities plus _____.

Equity

True or false: Dividends decrease both the Cash and the Retained Earnings of the business.

True

True or false: Dividends are expenses.

False.

_____ _____ data appear as revenues and expenses under Retained Earnings.

Income statement

The _____ _____ data are composed of the ending balances of the assets, liabilities, and stockholders' equities.

Balance sheet

The _____ _____ _____ _____ repeats net income (or net loss) from the income statement. Dividends are subtracted. Ending _____ _____ is the final result.

Statement of retained earnings; retained earnings

Data for the _____ _____ _____ _____ are aligned under the Cash account.

Statement of cash flows

The _____ _____ reports revenues, expenses, and either a net income or net loss for the period.

Income statement

The _____ _____ _____ _____ starts with the beginning balance of retained earnings, (zero for a new business). Add net income for the period, subtract dividends, and compute the ending balance of retained earnings.

Statement of retained earnings

The _____ _____ lists the assets, liabilities, and stockholders' equity of the business at the end of the period. Included in the stockholders' equity is retained earnings, which comes from the statement of retained earnings.

Balance sheet

Each transaction affects at least _____ accounts

Two

In a _____ account, the vertical line in the letter divides the account into its two sides: left and right. The account title appears at the top.

T

In a T account, the left side of each account is called the _____ side, and the right side is called the _____ side.

Debit, credit

The _____ side of an account shows what you received.

Debit

The _____ side of an account shows what you gave.

Credit

Increases in assets are recorded on the _____ ( _____ ) side of the account.

Left (debit)

Decreases in assets are recorded on the _____ ( _____ ) side of the account.

Right (credit)

Increases in liabilities and stockholders' equity are recorded by _____.

Credits

Decreases in liabilities and stockholders' equity are recorded by _____.

Debits

The amount remaining in an account is called its _____.

Balance

_____ are increases in stockholders' equity that result from delivering goods or services to customers.

Revenues

_____ are decreases in stockholders' equity due to the cost of operating a business.

Expenses

A debit _____ an asset account.

Increases

A credit ____ an asset account.

Decreases

A credit _____ a liability account.

Increases

A debit _____ a liability account.

Decreases

Accountants use a chronological record of transactions called a _____.

Journal

A _____ is a grouping of all the T-accounts, with their balances.

Ledger

"Books" refer to the accounts in the _____.

Ledger

Copying data to the ledger is called _____.

Posting

If an account's debits exceed its total credits, that account has a _____ _____, as for Cash.

Debit balance

If an account's credits are greater than the total debits, the account has a _____ _____.

Credit balance

A _____ _____ lists all accounts with their balances - assets first, then liabilities and stockholders' equity.

Trial balance

Another account format has _____ amount columns.

Four

When an account format has four columns, the first pair of amount columns are for the _____ and _____ amounts of individual transactions. The last two columns are for the _____ _____.

Debit and credit; account balance

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions above and try again

Example:

Reload the page to try again!

Reload

Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

NEW! Voice Recording

Create Set