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An accounting form that is used to record

the increases and decreases in each
financial statement item

Correct answer:

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An account in the general ledger that

summarizes the balances of the
accounts in a subsidiary ledger

Correct answer:

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Venetian monk to whom

Father of Double-entry Accounting
title is attributed

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True or False?
Every transaction affects
at least two accounts.

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An analysis and updating of the accounts

when financial statements are prepared

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Proof of equality of the

debit and credit balances

Correct answer:

According to the
American Accounting Association:

Accounting
is the process
of identifying, measuring, and communicating
economic information
to permit informed judgment and decision
by users of the information.

Accounting cycle
A process that begins with analyzing and
journalizing transactions and ends
with the post-closing trial balance

Identifying
Measuring

Communicating

Identifying
Measuring

Recording, Classifying, Summarizing

1.
2.
3.
4.
5.

Identifying
Measuring
Recording (Journalizing)
Classifying (Posting)
Summarizing (Financial statements)

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Identification and measurement of transactions

Journalizing
Posting
Unadjusted trial balance
Adjusting process
Financial statements
Adjusting entries are journalized and posted
Closing entries are journalized and posted
Post-closing trial balance
Reversing entries are journalized

Journalizing
Process of recording a transaction in the journal
Journal
A record in which the effects of a transaction are
initially recorded
Also known as book of original entry
Journal entry
Form of recording a transaction in the journal

General journal
Two-column form used for entries that do not fit
in any of the special journals

Special journals
Journals designed to be used for recording a
single type of transaction

Special journals:
Sales / Revenue journal

Cash receipts journal

Purchases journal
Cash payments journal

Double-entry accounting
System of accounting for recording transactions
based on recording increases and decreases in
accounts so that debits equal credits

Posting
Process of transferring the debits and credits
from the journal entries to the accounts

Account
Summary device used to record the increases
and decreases in each financial statement item
Simplest form: T-account

Chart of accounts
List of accounts in the ledger
Ledger
A group of accounts
Also known as book of final entry

General ledger
The primary ledger, when used in conjunction
with subsidiary ledgers, that contains all of the
SFP and income statement accounts
Subsidiary ledger
A ledger containing individual accounts with a
common characteristic

Controlling account
An account in the general ledger that
summarizes the balances of the accounts in a
subsidiary ledger

Balance of an account
Amount of difference between the debits and the
credits that have been entered into an account

Normal account balances:

Asset debit
Liability credit
Equity credit
Revenue credit
Expense debit

Trial balance
Proof of equality of the debit and credit balances

Errors that will not cause an unequal trial balance

Failing to record or post a transaction
Recording a transaction more than once
Recording the same erroneous amount for both the
debit and credit parts of a transaction

Posting a part of a transaction correctly as a debit or

credit but to the wrong account

Transposition
Order of the digits is changed mistakenly
Slide
Entire number is mistakenly moved one or more
spaces to the right or left
Also known as transplacement

Accrual basis accounting

Revenue recognition principle
Expense recognition principle
Matching principle

Accounting period

Going concern

Adjusting process
An analysis and updating of the accounts when
financial statements are prepared
Adjusting entries
Journal entries that bring the accounts up to
date at the end of the accounting period
Involves at least one real account and
one nominal account

Deferrals
Created by recording a transaction in a way that
delays recognition of an expense or a revenue

Accruals
Created by an unrecorded expense that has
been incurred or an unrecorded revenue that
has been earned

Deferred expenses (Prepayments)

Examples: prepaid rent, supplies, depreciation
Deferred revenues (Unearned revenues)
Examples: unearned rent, unearned interest
Accrued expenses (Accrued liabilities)
Examples: wages payable, interest payable

Accrued revenues (Accrued assets)

Examples: interest receivable

Statement of financial position

Income statement

Statement of changes in equity

Statement of cash flows
Notes to financial statements

Closing entries
Entries that transfer the balances of the
revenue, expense and drawing accounts to the
owners capital account
Entries that zero out the balance of an account

Income Summary
Account to which the revenue and expense
account balances are transferred

Post-closing trial balance

Trial balance prepared after posting all closing
entries

Reversing entry
An optional entry that is the exact opposite of
the adjusting entry to which it relates

All accruals
Prepayments (expense method)
Unearned revenues (revenue method)