Questions and Answers
What is a form of recording transactions in chronological order?
journal
What is the term for recording transactions in a journal?
journalizing
What is the information for each transaction recorded in a journal called?
entry
What is the recording of debit and credit parts of a transaction called?
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What is a business paper form from which information is obtained for a journal entry?
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What is a business form ordering a bank to pay cash from a bank account?
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What form describes the goods or services sold, the quantity, the price, and the terms of sale?
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What invoice is used as a source document for recording a sale on account?
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What is a business form giving written acknowledgment for cash received?
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What form contains a brief message to describe a transaction?
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Information in a journal includes the debit and credit parts of each transaction recorded in one place.
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The Objective Evidence accounting concept requires that there be proof that a transaction did occur.
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Examples of source documents include checks, sales invoices, receipts, and memorandums.
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A memorandum is the source document used when items are paid in cash.
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A receipt is the source document for cash received from transactions other than sales.
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A calculator tape is the source document for daily cash sales.
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The accounts affected when cash is received from the owner as an investment are Cash and Sales.
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When cash is paid for supplies, the Cash account is debited.
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When cash is used to pay for insurance, the asset account Prepaid Insurance increases.
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The source document used when supplies are ordered by telephone on account is a memorandum.
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The source document used when supplies bought on account are paid for is a receipt.
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When cash is received from sales, both the Cash account and the Sales account are increased.
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The source document 'sales invoice' is abbreviated as S in a journal entry.
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When services are sold on account, an asset account and a liability account are affected.
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The accounts affected when paying cash for equipment rental are Equipment Rental Expense and Cash.
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When cash is received on account, one asset account increases and another asset account decreases.
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The accounts affected when paying cash to the owner for a withdrawal of equity are the capital account and Cash.
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If there is only one blank line remaining on a journal page, it is standard practice to split the entry and record the second line of the entry on the next page.
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To correct an error in a journal, simply erase the incorrect item and write the correct item in the same place.
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If an error is detected in a journal entry after several additional journal entries have been made, the entry should be corrected by drawing a line through the incorrect parts and writing the correct parts on the same line above the error.
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Match the following accounts affected with their transactions:
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Study Notes
Journalizing Transactions
- Journal: A record of transactions in chronological order, essential for organizing financial data.
- Journalizing: The act of entering transaction details into a journal, ensuring accurate documentation.
- Entry: Represents information for each transaction recorded in a journal, including date, accounts affected, and amounts.
Double-Entry Accounting
- Double-entry accounting: A system that records both the debit and credit components of each transaction, promoting accuracy and balance in accounting records.
Source Documents
- Source document: A business form used to gather information for journal entries, essential for supporting financial transactions.
- Types of source documents include:
- Check: Orders a bank to pay cash from an account.
- Invoice: Detailed form documenting goods/services sold, including quantity and price.
- Sales invoice: A specific invoice serving as a source document for sales on account.
- Receipt: Written acknowledgment for cash received.
- Memorandum: Brief message summarizing a transaction.
Accounting Principles
- Objective Evidence concept: Stipulates that proof of a transaction is required; supported by proper documentation.
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True statements regarding journals:
- Includes both debit and credit information in one location.
- Examples of source documents: checks, invoices, receipts, and memorandums.
Transactions and Accounts Affected
- When cash is received from sales, both the Cash and Sales accounts increase.
- Paying cash for supplies affects the Supplies and Cash accounts.
- Receiving cash for services leads to changes in Cash and Accounts Receivable.
- Various financial activities involve specific accounts, such as those for investment, withdrawals, and expenses.
Accounting Corrections
- If one blank line remains on a journal page, the remaining entry should continue on the next page instead of splitting.
- Errors in journal entries should not be erased. Instead, correct an error by drawing a line through the mistake and noting the correction above it.
Specific Account Transactions
- Cases involving cash receipts or payments, investments, and withdrawals illustrate how different accounts interact:
- Cash received from the owner as an investment increases Cash and Capital account.
- Payment for supplies or services usually reduces Cash accounts while increasing respective asset accounts (e.g., Supplies, Prepaid Insurance).
- Accounts Payable is affected when supplies are bought on credit, illustrating liabilities in transaction management.
Miscellaneous
- Important true/false concepts:
- Cash payment for equipment rental affects both Equipment Rental Expense and Cash accounts.
- Incorrect journal entries should be corrected without erasing past errors.
- Acknowledgment of cash received through receipts supports the necessity of accurate documentation in various transactions.
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Description
This study guide consists of essential flashcards covering key concepts from Chapter 3 of Accounting I Honors. It focuses on the process of journalizing transactions, including definitions and examples pertinent to the recording of transactions. Perfect for revising and reinforcing your understanding of journal entries.
