Definition of accounting, what is accounting cycle? And how to record business transactions, it consist on various series which started from journal entries, ledger, and trial balance. key terms of accounting. The Accounting Rules of debit and credit, Debit money, assets and liabilities, Bad Debits, Balance Sheet, Double-entry, bad debts, inventory, Expenses, depreciation , Accumulated Depreciation , types of ledger account, categories of general ledger account, Assets and Liabilities, Owners’ Equity, Revenue Expansion of the Basic Equation and Expense, and examples.
6. • The name given to the collective process of recording and
processing the accounting events of a company. The series of steps
begin when a transaction occurs and end with its inclusion in the
financial statements.
1. Collecting and analysing data from transactions and events.
2. Putting transactions into the general journal.
3. Posting entries to the general ledger.
4. Preparing an unadjusted trial balance.
5. Adjusting entries appropriately.
6. Preparing an adjusted trial balance.
7. Organizing the accounts into the financial statements.
8. Closing the books.
9. • documents are important because they are the ultimate proof a
business transaction has occurred.
• is a part of the accounting system used to classify and summarize
the increases, decreases, and balances of each asset, liability,
stockholders' equity item, dividend, revenue, and expense.
• that each transaction be recorded by an entry that has equal debits
and credits is called double-entry procedure.
procedure keeps the accounting equation in balance
10.
11. • A registry of pecuniary transactions; a written or printed statement of
business dealings or debts and credits, and also of other things subjected
to a reckoning or review
• Account a written or printed statement of business dealings or debts
and credits, and also of other things
• The development and use of a system for recording and analysing the
financial transactions and financial status of a business or other
organization.
• Amounts that customers owe the company for normal credit purchases.
Accumulated depreciation is known as a contra account, because it
separately shows a negative amount that is directly associated with
another account.
12. •
Something or someone of any value; any portion of one's
property or effects so considered
Items of ownership convertible into cash; total resources
of a person or business, as cash, notes and accounts receivable;
securities and accounts receivable, securities, inventories,
goodwill, fixtures, machinery, or real estate (as opposed to
liabilities)
Any property or object of value that one possesses,
usually considered as applicable to the payment of one's debts
A resource with economic value that an individual,
corporation, or country owns or controls with the expectation that
it will provide future benefit
13. • A debt which cannot be recovered from the debtor, either
because the debtor doesn't have the money to pay or
because the debtor cannot be found and/or forced to pay
• bad debts A bad debt is an amount owed to a business or
individual that is written off by the creditor as a loss (and
classified as an expense) because the debt cannot be
collected and all reasonable efforts to collect it have been
exhausted. This usually occurs when the debtor has
declared bankruptcy or the cost of pursuing further action
in an attempt to collect the debt exceeds the debt itself.
14. balance sheet A summary of a person's
or organization's assets, liabilities. and
equity as of a specific date. Balance
Sheet A balance sheet is often described
as a "snapshot of a company's financial
condition." A standard company balance
sheet has three parts: assets, liabilities,
and ownership equity
15. • an entry in the right hand column of an account; credits
increase liability, income, and equity accounts and decrease
asset and expense accounts
• an entry in the left hand column of an account to record a
debt; debits increase asset and expense accounts and decrease
liability, income, and equity accounts
• a written or printed statement of business dealings or debts
and credits, and also of other things subjected to a reckoning
or review
that one person or entity owes or is required to pay to
another, generally as a result of a loan or other financial
transaction
16.
17. dividend A pro rata payment of
money by a company to its
shareholders, usually made
periodically (e.g., quarterly or
annually)
23. This
category includes
Assets, Liabilities, and
Stockholders‟ Equities (i.e.,
Balance Sheet accounts)
Accounts are permanent.
Account balances are
carried forward from one
fiscal year to the next.
Nominal
accounts include
revenues and expenses.
Nominal accounts are
temporary.
Nominal account balances
are closed out to zero at
the end of the fiscal year
24. •
a book or computer file in which monetary transactions are
entered the first time they are processed
• A journal entry, in accounting, is a logging of transactions into
accounting journal items. The journal entry can consist of
several items, each of which is either a debit or a credit. The
total of the debits must equal the total of the credits or the
journal entry is said to be "unbalanced." Journal entries can
record unique items or recurring items, such as depreciation or
bond amortization.
25. • A collection of accounting entries consisting of credits and
debits.
• A book for keeping notes, especially one for keeping
accounting records.(accounting) A collection of accounting
entries consisting of credits and debits.
26. • liability An obligation, debt or responsibility owed to
someone.
• liabilities An amount of money in a company that is
owed to someone and has to be paid in the future, such
as tax, debt, interest, and mortgage payments
•
Liabilities Probable future sacrifices of economic
benefits arising from present obligations to transfer
assets or providing services as a result of past
transactions or events.
27. • an entry in the left hand column of an account to record a
debt; debits increase asset and expense accounts and
decrease liability, income, and equity accounts
• A registry of pecuniary transactions; a written or printed
statement of business dealings or debts and credits, and
also of other things subjected to a reckoning or review
• an entry in the right hand column of an account; credits
increase liability, income, and equity accounts and
decrease asset and expense accounts
30. • Record of increases and decreases in a specific asset, liability,
equity, revenue, or expense item.
• Debit = “Left”
• Credit = “Right”
Account Name
An Account can be
illustrated in a
T-Account form.
Debit / Dr.
Credit / Cr.
31. • Each transaction must affect two or more
accounts to keep the basic accounting
equation in balance.
• Recording done by debiting at least one
account and crediting another.
38. Assets
Debit / Dr.
Debits should
exceed credits.
Credits
should exceed debits.
Credit / Cr.
Normal Balance
Chapter
3-23
Liabilities
Debit / Dr.
Credit / Cr.
is on the increase side.
Normal Balance
Chapter
3-24
39.
40. Owner’s Equity
Debit / Dr.
Credit / Cr.
increase owner‟s equity (credit).
Normal Balance
decrease owner‟s equity (debit).
Chapter
3-25
Owner’s Capital
Owner’s Drawing
Chapter
3-25
Credit / Cr.
Debit / Dr.
Normal Balance
Debit / Dr.
Normal Balance
Chapter
3-23
Credit / Cr.
41. Relationship among the assets, liabilities & owner‟s
equity of a business:
Assets = Liabilities
+
Owner’s Equity
The equation must be in balance after every
transaction. For every Debit there must be a Credit.
42. Revenue
Debit / Dr.
Chapter
3-26
Expense
Normal Balance
Chapter
3-27
The purpose of earning
is to benefit the owner(s).
The effect of debits and credits on
revenue accounts is the
their effect on Owner‟s Capital.
Credit / Cr.
Normal Balance
Debit / Dr.
Credit / Cr.
have the opposite
effect: expenses decrease owner‟s
equity.
43. • Book of original entry.
• Transactions recorded in chronological order.
• Discloses the complete effects of a transaction.
• Provides a chronological record of transactions.
• Helps to prevent or locate errors because the debit
and credit amounts can be easily compared
44.
45. On
January 1, 19X7, Caldwell Company borrows
$10,000 from the bank.
Prepare the appropriate general journal entry for the
above transaction.
47. On
January 15, 19X7, Caldwell Company purchases a
truck for $19,500 cash.
Prepare the appropriate journal entry for the above
transaction.
Trucks is increased by $19,500.
Cash is decreased by $19,500.
48.
49. On
January 20, 19X7, Caldwell Co. pays the $400
electric bill for January.
Prepare the appropriate journal entry for the above
transaction.
Utility Expense is increased by $400.
Cash is decreased by $400.
50.
51. On
Oct. 3 Purchases office furniture for $1,900, on account.
53. Oct.
30 Pays the administrative assistant $2,500 salary
for Oct.
54. Two
accounts, one debit and one credit.
Three or more accounts.
Example – On June 15, H. Burns, purchased equipment for
$15,000 by paying cash of $10,000 and the balance on
account (to be paid within 30 days).