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Accounting Midterm 1

Accounting Midterm 1 - Accounting Documents Journal Gives a...

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Accounting Documents Journal : Gives a complete record of each transaction in one place. It also shows debits and credits for each transaction. Includes 1) date of transaction, 2) titles of affected accounts, 3) dollar amount of each debit and credit, 4) explanation of the transaction. Account : Record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. Information from an account is analyzed, summarized, and presented in reports and financial statements. Chart of accounts : List of all accounts a company uses and includes an identification number (P.R.) assigned to each account. General ledger or Ledger : A record containing all accounts used by a company. Journal entry information is processed to the ledger. Separates each account. Ex: Cash. Common Stock. Transaction Analysis Journalizing : The process of recording transactions in a journal. Double-entry Accounting : Requires the each transaction affect, and be recorded in, at least two accounts. Also means the total amount debited must equal the total amount credited for each transaction. Debit and Credit Rules : The difference between total debits and total credits for an account is the account balance. Debit and Credit Rules Accounts Increase Decrease Asset Debit Credit Liability Credit Debit Common Stock Credit Debit Dividends Debit Credit Revenue Credit Debit Expense Debit Credit Posting : The process of transferring journal entry information to the ledger. Trial Balance : 1) List each account title and its amount (from ledger) in the trial balance. 2) Compute the total of debit balances and the total of credit balances. 3) Verify total debit equals total credit. Income Statement : Reports the revenues earned less the expenses incurred by a business over a period of time to find net income. Statement of Retained Earnings : Explains changes in retained earnings from net income and from any dividends over a period of time.
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Balance Sheet : Describes a company’s financial position (types and amounts of assets, liabilities and equity) at a point in time.
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