3 Recording Transactions and the Accounting Cycle Free Online FlashCards

What are the main steps in the accounting cycle?

The cycle moves from analyzing transactions to recording them in a journal, posting them to ledger accounts, and preparing an unadjusted trial balance.

What qualifies as a business transaction?

A transaction is an economic event measurable in money that affects the business. Evidence such as a receipt, invoice, deposit record, or contract helps determine what occurred.

What do debit and credit mean?

A debit is recorded on the left side of an account, and a credit on the right. Neither term inherently means an increase or decrease; the effect depends on account type.

What is the purpose of a journal?

A journal records transactions in date order, preserving the sequence in which they occurred.

What does a ledger show that a journal does not?

A ledger groups all entries by account, showing the activity and balance for each account.

When is an unadjusted trial balance prepared, and what does it check?

An unadjusted trial balance lists ledger account balances in debit or credit columns after posting and before adjusting entries. It checks whether total debits equal total credits.

What changes when a business buys supplies on credit?

Buying supplies on credit increases Supplies, an asset, and Accounts Payable, a liability, by the same amount.

What are the normal balances of the main account types?

Assets and expenses normally have debit balances. Liabilities, owner’s equity, and revenue normally have credit balances.

What information and order appear in a general journal entry?

A general journal entry identifies the date, accounts, debit and credit amounts, and often a brief explanation. List debit accounts first, then indent credit accounts.

What must be true of the debits and credits in each journal entry?

Each journal entry must have equal total debits and total credits.

What is Cash’s ending balance after posting the six example transactions?

Posting transfers journal amounts to the corresponding ledger accounts. After all six example transactions are posted, Cash has an ending debit balance of $\$8{,}300$.

What are the debit and credit totals in the example trial balance?

In the example unadjusted trial balance, total debits and total credits are each $\$12{,}700$.