Accounting Chapter 3 Flashcards

Questions and Answers

What is an account?

An individual accounting record of increases and decreases in specific asset, liability, stockholders' equity, revenue or expense items

What is an Accounting Information System?

The system of collecting and processing transaction data and communicating financial information to decision-makers

What are accounting transactions?

Events that require recording in the financial statements because they affect assets, liabilities, or stockholders' equity

What is a Chart of Accounts?

A list of a company's accounts Signup and view all the answers

What does 'credit' refer to in accounting?

The right side of an account Signup and view all the answers

What does 'debit' mean in accounting?

The left side of an account Signup and view all the answers

What is a Double-Entry System?

A system that records the two-sided effect of each transaction in appropriate accounts Signup and view all the answers

What is a General Journal?

The most basic form of journal Signup and view all the answers

What is a General Ledger?

A ledger that contains all asset, liability, stockholders' equity, revenue, and expense accounts Signup and view all the answers

What is a Journal?

An accounting record in which transactions are initially recorded in chronological order Signup and view all the answers

What does journalizing refer to?

The procedure of entering transaction data in the journal Signup and view all the answers

What is a Ledger?

The group of accounts maintained by a company Signup and view all the answers

What does posting refer to in accounting?

The procedure of transferring journal entry amounts to the ledger accounts Signup and view all the answers

What is a T-Account?

The basic form of an account that shows the debits and credits Signup and view all the answers

What is a Trial Balance?

A list of accounts and their balances at a given time Signup and view all the answers

What is Transaction Analysis?

The process of identifying the specific effect of economic events on the accounting equation Signup and view all the answers

A change in an asset must equal a change in what?

Liability and Stockholders' Equity Signup and view all the answers

When is unearned revenue recorded as revenue?

When the work has been performed Signup and view all the answers

When you collect Accounts Receivables, does it affect revenue?

No, it does not affect revenue. It is one exchange of an asset for another Signup and view all the answers

What are the three parts of a T-Account?

(1) The title of the account, (2) a left or debit side, (3) a right or credit side Signup and view all the answers

What is the order of presentation in the trial balance?

Assets, Liabilities, Stockholders' Equity, Revenues, Expenses Signup and view all the answers

What are the three procedures for preparing a trial balance?

(1) List the account titles and their balances, (2) total the debit column and total the credit column, (3) verify the equality of the two columns Signup and view all the answers

What is the difference between an error and an irregularity?

An error is an unintentional mistake versus an irregularity which is an intentional mistake that is reviewed as unethical Signup and view all the answers

Study Notes

Key Accounting Concepts

Account: A record tracking specific increases and decreases in assets, liabilities, equity, revenue, or expenses.
Accounting Information System: A framework for collecting, processing, and communicating transaction data for decision-makers.
Accounting Transactions: Events impacting asset, liability, or equity that necessitate recording in financial statements.
Chart of Accounts: A comprehensive list defining a company’s accounts and categories.

Accounting Mechanics

Credit: Represents the right side of an account, indicating increases in liabilities or equity, and decreases in assets.
Debit: Refers to the left side of an account, representing increases in assets or expenses, and decreases in liabilities or equity.
Double-Entry System: Method ensuring each transaction is recorded in two accounts, reflecting its dual impact.

Journals and Ledgers

General Journal: The fundamental journal for recording transactions chronologically.
General Ledger: A complete collection of all accounts for assets, liabilities, equity, revenue, and expenses.
Journal: An accounting log used for the initial entry of transactions.
Journalizing: The process of recording transaction details into the journal.
Ledger: The entire set of accounts a company maintains.
Posting: The act of transferring information from the journal to respective ledger accounts.

T-Accounts and Trial Balance

T-Account: A visual representation of an account, illustrating debits on the left and credits on the right.
Trial Balance: A summary of accounts and balances at a particular time, confirming the equality of debits and credits for financial statement preparation.

Transaction Analysis

Transaction Analysis: The assessment of how economic events influence the accounting equation, emphasizing that changes in assets must correspond with changes in liabilities and equity.

Revenue Recognition

Unearned Revenue Recognition: Recorded as revenue only when the corresponding work has been completed.
Collection of Accounts Receivable: Does not impact revenue; it's a mere exchange of one asset for another, with no net effect on total revenue.

T-Accounts Structure

Components of T-Accounts: Includes the account title, the debit side (left), and the credit side (right).

Trial Balance Procedures

Order of Presentation in Trial Balance: Organized as Assets, Liabilities, Stockholders' Equity, Revenues, and Expenses.
Steps to Prepare Trial Balance: Involves listing account titles and balances, totaling debit and credit columns, and verifying their equality.

Errors vs. Irregularities

Errors: Unintentional mistakes made in accounting practices.
Irregularities: Intentional acts deemed unethical that involve manipulation of financial data.

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Description

Test your knowledge with these flashcards covering key terms and definitions from Accounting Chapter 3. Perfect for reinforcing essential concepts in accounting, including accounts, accounting information systems, and transactions.