Questions and Answers
What is a ledger?
What is a general ledger?
A ledger that contains all accounts needed to prepare financial statements
What is the purpose of an account number?
The number assigned to an account
What does file maintenance involve?
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What does opening an account mean?
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What is posting in accounting?
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What does proving cash refer to?
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What is a correcting entry?
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An account form has columns for the debit and credit balance of an account.
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The asset division accounts for TechKnow Consulting are numbered in the 200's.
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The cash account is the first asset account labeled 200.
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The second division of TechKnow Consulting's chart of accounts is owner equity.
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The last two digits in a 3-digit account number indicate the general ledger division of the account.
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Journal errors discovered before entries are posted are corrected by preparing a memorandum describing the correction.
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Each amount in the debit and credit columns of a general journal is posted to the account in the Account Title column.
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Recording and posting reference is always the last step in the posting procedure.
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In which division are assets classified?
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What is the account number for cash?
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What does the account number 300 refer to?
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Cash can be proved at any time.
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Study Notes
Accounting Basics
- A ledger is a collection of accounts used to track financial transactions.
- The general ledger includes all accounts necessary for preparing financial statements.
- An account number uniquely identifies each account within the ledger.
Account Management
- File maintenance involves organizing accounts, assigning numbers, and ensuring records are up-to-date.
- When opening an account, the account title and number are recorded at the top of the account entry.
- Posting is the process of transferring data from a journal to the relevant ledger account.
Cash Management
- Proving cash ensures that the cash amount matches the reported balance in accounting records.
- Discrepancies can be corrected through a correcting entry, which amends previous journal entries.
True/False Concepts
- Accounts form typically feature debit and credit columns and are known as balance-ruled accounts.
- Accounts in the asset division are designated numbers in the 100 series, while the cash account is the first and labeled 100.
- Owner equity is not the second division; it is represented with account numbers starting from 300.
- The last two digits of a 3-digit account number do not indicate the general ledger division but rather account type.
- Expense accounts in the general ledger are arranged according to their account number, not chronologically.
Posting Procedures
- Each entry in the journal's debit and credit columns is linked to a specific account by notation in the Account Title.
- The Post.Ref. columns are crucial for tracking which journal entries need posting.
- A missing reference in the Post.Ref. column indicates that posting is pending.
- The posting procedure includes documenting the transaction date in the account's date column.
Balancing Accounts
- When credits exceed debits in an account, the balance becomes a credit.
- Cash balances can be verified at any time through reconciliation with the checkbook.
Correcting Entries
- Errors identified before journal entries are posted require a memorandum to describe the needed corrections.
- Correcting entries follow the same procedural steps as standard journal entries.
Account Numbering
- Asset accounts begin at 100, followed by specific categories:
- 110: Cash
- 120: Accounts Receivable
- 140: Supplies
- 150: Prepaid Insurance
-
200 represents liabilities, starting with:
- 210: Accounts Payable
-
300 reflects owner's equity, with:
- 310: Capital
- 320: Drawing Account
- Revenue is categorized under account numbers beginning at 400, specifically:
- 410: Sales
- 500 accounts categorize expenses.
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Description
Test your knowledge with these flashcards covering key terms from Chapter 4 of accounting. Learn the meanings of important concepts like ledger, general ledger, account number, and file maintenance. Perfect for reinforcing your understanding of the foundational aspects of accounting.
