Transaction
- is any event that has a financial impact on the business and can be measured reliably
- provides objective information about the financial impact on a company: you give something, you receive something
Cash
means money or an medium of exchange including bank account balances, paper currency, coins, certificates of deposit and checks
Accounts receivable
Sells its goods and services and receives a promise for future collection of cash
Notes receivable
signed a note promising to pay, more binding because the customer signed the note
Inventory
most important asset- merchandise inventory
Prepaid expenses
pays certain expense in advance, an asset because the payment provides a future benefit for businesses
Land
shows the cost of land uses in its operations
Accounts payable
Promise to pay a debt arising from a credit purchase of inventory of from a utility bill appears in the account payable account
Notes payable
includes the amount that must be paid because signed notes promising to pay a future amount carry interest
Accrued Liability
is a liability for an expense you have not yet paid
ex: salary payable
Performed services on account
Accounts receivable increases
Collected on account
Accounts receivable decreases
Purchased on account
Accounts payable increases
Paid on account
Account payable decreases
When Debit increases Credit decreases
assets, dividends, expenses
When Credit increases and Debit decreases
liabilities, common stock, retained earnings, revenues
Trial Balance
is a listing, in general ledger order (assets, liabilities, then stockholders equity) of the debit or credit balance in each account
What are some common errors of unequal common totals
1. posting incorrectly
2. mathematical errors
- transposition: writtein in wrong order
- slide. one or more zeroes are added to or left off
3. Omitting or entering account balances in the wrong column of the trial balance