2 Accounts, Debits, and Credits Free Online FlashCards

What does an account track?

An account is a record that tracks increases, decreases, and the balance of one item in a business’s financial records.

What are assets?

Assets are resources the business controls, such as cash, inventory, and equipment.

What do debit and credit mean in a T-account?

A debit is an entry on the left side of an account; a credit is an entry on the right. Neither inherently means increase or decrease.

What must be true of debits and credits in double-entry bookkeeping?

Every transaction has at least one debit and one credit, and total debits must equal total credits.

Which account types normally increase with debits?

Assets, expenses, and owner withdrawals or dividends normally increase with debits and have debit normal balances.

What is a contra account?

A contra account has a normal balance opposite to its related account. Accumulated Depreciation normally has a credit balance because it reduces an asset’s reported amount.

What is a chart of accounts?

A chart of accounts is the organized list of accounts a business uses to classify transactions consistently.

What are liabilities?

Liabilities are amounts the business owes, such as Accounts Payable or a bank loan.

What does equity represent?

Equity is the owners’ residual interest in the business, including owner contributions and accumulated earnings.

What are revenues, and how do they affect equity?

Revenues are amounts earned from providing goods or services. They increase equity.

What are expenses, and how do they affect equity?

Expenses are costs incurred to earn revenue, such as wages, rent, or utilities. They decrease equity.

Which account types normally increase with credits?

Liabilities, equity accounts such as owner capital, and revenues normally increase with credits and have credit normal balances.