Chapter 2 Analyzing Transactions

Chapter 2 Analyzing Transactions - Chapter 2 Analyzing...

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Chapter 2 Analyzing Transactions ______________________________________________ Chapter 2 introduces the rules of debit and credit, two-column journals, four-column ledgers, the chart of accounts, the trial balance, and horizontal analysis. Chapter 2 builds the foundation for all that will be learned about accounting principles. Unlike many other college courses, it is impossible to understand Chapter 3 and beyond if the principles of Chapter 2 are not mastered. You need to dispel the false belief that "maybe I'll get the next chapter—even though I'm totally lost now." I encourage you to seek help immediately if you begin to struggle with course content. Tutorial services (go to http://www.foothill.edu/tut/ to enter its website) , peer assistance through “Student Lounge” via “Discussion and Private Messages” of ETUDES , and my office hours are there to provide you with help. Too frequently, students wait until after they have unsuccessfully completed their first examination to seek help. For those who seek help, these resources will ensure their success in the course. After studying the chapter, you should be able to: 1. Explain why accounts are used to record and summarize the effects of transactions on financial statements. 2. Describe the characteristics of an account. 3. List the rules of debit and credit and the normal balances of accounts. 4. Analyze and summarize the financial statement effects of transactions. 5. Prepare a trial balance and explain how it can be used to discover errors. 6. Discover errors in recording transactions and correct them. 7. Use horizontal analysis to compare financial statements from different periods. KEY TERMS: Account Ledger Assets Liabilities Chart of Accounts Owner’s Equity Drawing Revenues Expenses Accounts are used to record business transactions. An account is simply a record of all the increases and decreases in a financial statement item (such as cash, supplies, and accounts payable). A group of accounts is called a ledger. Only a very small enterprise with very few transactions (such as a lawn mowing service run by
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This note was uploaded on 04/03/2010 for the course ACTG 1A 1 taught by Professor E during the Spring '10 term at Foothill College.

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Chapter 2 Analyzing Transactions - Chapter 2 Analyzing...

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