Chapter 2: The Recording Process

Question 1

Double Entry System

Answer 1

• Each Transaction must affect two or more accounts
• DEBITS must equal CREDITS
• Recording is done by debiting at least on account and crediting another

Question 2

DEBIT Balance

Answer 2

Debit Amount > Credit Amounts

Question 3

CREDIT Balance

Answer 3

Debit Amount < Credit Amount

Question 4

Equity Relationships

Answer 4

Question 5

The Journal

Answer 5

“Grundbuch”

• Book of original entry
• Transaction recorded in chronological order

Question 6

The Ledger

Answer 6

• General Ledgers contains the entire group of accounts maintained by a company
• arranged in financial statement order

Question 7

Posting

Answer 7

Process of transferring aomunts from the Journal to the Ledger accounts

Question 8

Chart of Accounts

Answer 8

List of Account and Account numbers in the sequence in which they are presented in the financial statments

• Listing of the accounts and the account number that identify their location in the ledger

Question 9

Steps in Recording Process

Answer 9

1. Analyze each transaction
2. Enter Transaction in a journal
3. Transfer journal information to ledger accounts

Question 10

Journalizing

Answer 10

Enterin a transaction data into the journal

Question 11

Trial Balance

Answer 11

• A list of accounts and their balances at a given point in time
• Primary purpose is to prove that the debits total equal the credits total after posting

Question 12

Currency Signs

Answer 12

• Do not appear in a journal or ledger
• Appear in financial statment and trial balance

Question 13

Limitations of a Trial Balance

Answer 13

It does not guarantee freedom from recording errors

A Trial Balance can balance even when

• a transaction is not journalized
• a correct journal entry is not posted
• a journal entry is posted twice
• incorrect accounts are used in journalizing/posting
• offsetting errors are made in recording amount of a transaction