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Financial Accounting Chapter 2

Transaction Analysis
STUDY
PLAY
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