Chapter 3 Summary Accounting 2023 with 100% correct questions and answers

Event a happening or consequence to an entity External event an event involving interaction between an entity and its environment Internal event an event occurring entirely within an entity Transaction any event that is recognized in a set of financial statements Source document a piece of paper that is used as evidence to record a transaction Economic events are the basis for recording transactions in an accounting system The accounting equation has to balance with every transation The cost principle requires that we record as asset at the cost to acquire it and continue to show this amount on all balance sheets until we dispose of the asset. Even though individual transactions may change the amount and composition of the assets and liabilities, the equation must always balance for each transaction and the balance sheet must balance after each transaction Dividends do not appear on the income statement, they are not an expense. They are a distribution of net income of the period and are shown on the statement of retained earnings. Account a record used to accumulate amounts for each individual asset, liability, revenue, expense, and component of stockholders' equity ( the basic unit for recording transactions) Chart of accounts a numerical list of all accounts used by a company General ledger a book, a file, a hard drive, or another device containing all of the accounts Double entry system is the method we use to record transactions T account is a format often used to analyze transactions. The name of the account appears across the horizontal line Debit an entry on the left side of an account Credit an entry on the right side of an account Double entry system a system of accounting in which every transaction is recorded with equal debits and credits, and the accounting equation is kept in balance. DR: debit, CR: credit, DR: CR always Journal a chronological record of transactions Posting the process of transferring amounts from a journal to the ledger accounts. Posting does not result in any change in the amounts recorded. It is simply a process of re-sorting the transaction from a chronological order to a topical arrangement. Journalizing the act of recording journal entries General journal the journal used in place of a specialized journal Specialized journals would be used for repetitive transactions (i.e. cash receipts journal, cash disbursements journal, sales journal, sales journal)