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Chapter 2
N/A
11
Accounting
Undergraduate 2
01/27/2015

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Cards

Term
T-Accounts
Definition
- quick simple tools to see how a small number of transactions and events will impact a company
- debits on the left, credits on the right
- the "balance" is the amount by which debits exceed credits (or vice versa)
- for very transaction debits= credits
Term
T-Accounts
Definition
1. assets: debits(+), credits(-)
2. liabilities: debit(-), credit(+)
3. equity: debit(-), credit(+)
*D-E-A-D= Debits increase Expenses, Assets, and Dividends*
Term
Basic Processing Tools
Definition
- accounts
- general ledger
- debits and credits
- journals
Term
Accounts
Definition
- records that are kept for each asset, liability, revenue, expense, and dividend component of an entity
- all accounts comprise a general ledger
- control accounts should be reconciled w/ subsidaries
Term
Analyzing and Recording Process
Definition
1. Analyze each transaction and event from source documents
2. record relevant transactions and events in a journal
3. post journal information to ledger accounts
4. prepare and analyze the trial balance
Term
Source Documents
Definition
- evidence of a transaction or vent: checks, purchase orders, bills from suppliers, bank statements, employee earnings records
Term
The Journal
Definition
- a chronological listing of transactions and events(documented in debit/credit format)
- aka "book of original entry"
- list debits first(flush left), then credits(indented right)
- compound entry may involve more than two accounts
Term
The General Ledger
Definition
- a record of accounts comprising the financial statements and their balances
Term
Trial Balance
Definition
- a listing of the ledger accounts along w/ their respective debit or credit balances
- not a formal financial statement
- self-check to determine that debit equals credit
Term
Financial Statements
Definition
_ Basic Process: transfer amounts from the general ledger to the trial balance, then into the financial statements
Term
*Debt Ratio*
Definition
- total liabilities/total assets
- evaluates the level of debt risk
- a higher ratio indicates that there is a greater probability that a company will not be able to pay its bills in the future
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