5TH QTR Mr. Bridgewater- Accounting quiz # 2

Question Answer
double entry accounting the process of recording equal debits and credits for a single transaction
transaction any activity of a business enterprise that involves the exchange of value
account a device for recording the changes (increases and decreases) in the fundamental accounting equation
debit the left side of a standard account
credit the right side of a standard account
debit = dr
credit= cr
accounting equation assets = liabilities + owners equity
A=L+OE accounting equation
liabilities represent the outside interests of creditors
owners equity represents the inside interests of the owners
when two elements are known the third can always be calculated
t-accounts a skeleton form of an account used for instructional purposes.
remember your plus and minus
the simplest form of an account consists of the title of the account a left or debit side a right or credit side
to determine the balance of a t account at any time simply total the dollar amounts on the debit and credit sides
account balance the difference between the total debits and the total credits of an account
footing summary of the debits (left side of any account) and credits (right side of any account) to obtain a new balance. usually are small pencil footings.
transaction analysis the effect of business activities on the accounting equation
three basic questions when analyzing the effects of the accounting equation what happened which accounts are affected how is the accounting equation affected? aka increase? or decrease?
after each and every transaction you record the accounting equation should remain in balance
each transaction affects at least two accounts one or more of the three basic accounting elements
expanded accounting equation original accounting equation with the addition of : revenue, expenses , and withdrawals
additions to accounting equation to make it expanded accounting equation revenue expenses withdrawals
income/revenue an inflow of assets as a result of selling a product or providing a service
income aka revenue
expense a decrease in assets other than withdrawals by the owner, which result from efforts to produce revenue
common examples of expenses are rent salaries supplies consumed taxes
drawing account (owner withdrawals) a separate owners equity account in which withdrawals of cash and other assets by their owner for personal use are recorded
(owner withdrawals) aka drawing account
revenues do what increase owners equity
expenses and drawing do what reduce owners equity
normal balance is the side of an account used to increase the account
normal balances for the accounts are shown with a +
assets account +/- and normal balance debit = increase credit = decrease normal balance = debit
liabilities +/- and normal balance credit = increase debit = decrease normal balance= credit
owners capital +/- and normal balance credit = increase debit = decrease normal balance = credit
revenues +/- and normal balance credit = increase debit = decrease normal balance = credit
expenses +/- and normal balance debit = increase credit = decrease normal balance = debit
drawing +/- and normal balance debit = increase credit = decrease normal balance = debit
debits may increase or decrease the balances of specific accounts- true or false true
credits may increase or decrease the balances of specific accounts- true or false true
most revenue accounts end with the word fees

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