Acct. Ch.2

Account

The detailed record of all the changes that have occurred in a particular asset, liability, or owners' equity (stockholders' equity) during a period. The basic summary device of accounting.

Accrued Liability

A liability for which the business known the amount owed but the bill has not been paid

Chart of Accounts

A list of all a company's accounts with their account numbers

Compound Journal Entry

Same as a journal entry, except this entry is characterized by having multiple debits and/or multiple credits. The total debits still equal the total credits in the compound journal

Credit

The right side of an account

Debit

The left side of an account

Double-Entry System

A system of accounting where every transaction affects at least two accounts

Journal

The chronological accounting record of an entity's transactions

Ledger

The record holding all the accounts and amounts

Normal Balance

The balance that appears on the side of an account -debit or credit- where we record increases

Note Receivable

A written promise for future collection of cash

Notes Payable

Represents debts the business owes because it signed promissory notes to borrow or to purchase something

Posting

Copying amounts from the journal to the ledger

Prepaid Expenses

Expenses paid in advance of their use

T-account

Summary device that is shaped like a capitol "T" with debits posted on the left side of the vertical line and credits on the right side of the vertical line. A "shorthand" version of a ledger

Trial Balance

A list of all the ledger accounts with their balances at a point in time

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Commit to memory the normal balance of the six main account types. The normal balance is the side of the T-account where the account INCREASES. Assets, Dividends, and Expenses have normal debit balances. Liabilities, Equity, and Revenues have normal credi

Debits are listed first in every journal entry

Debits ALWAYS EQUAL credits in every journal entry

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Keep in mind that posting is just gathering all the journal entries made to an individual T-account so that you can determine the new balance in the account . Journal debit entries are posted on the left side of the T-account. Journal credit entries are p

The accounting equation MUST ALWAYS balance after each transaction is posted

The trial balance lists all accounts with a balance, ordered by assets, liabilities, equity, dividends, revenues, and expenses. Total debits should equal total credits on the trial balance