Introduction

Question 1

Assets

Answer 1

debit = increase (normal balance)
credit =decrease

Question 2

Liabilities

Answer 2

debit = decrease
credit = increase (normal balance)

Question 3

Owners equity

Answer 3

debit = decrease
credit = increase (normal balance)

Question 4

Drawings

Answer 4

debit = increase(normal balance)
credit = decrease

Question 5

Revenue

Answer 5

debit = decrease
credit = increase (normal balance)

Question 6

Expense

Answer 6

debit = increase (normal balance)
credit = decrease

Question 7

Double-Entry Accounting System

Answer 7

Each transaction is recorded with equal debits and credits
- Total debits always equals total credits
Accounting equation will always stay in balance
- Assets = Liabilities + Owner’s Equity
Every account has a normal balance
- Either debit or credit

Question 8

The Journal

Answer 8

• Where transactions are first recorded
• Every company has a general journal

Question 9

Contributes to recording process:

Answer 9

• Discloses complete effect of a transaction in one place
• Provides a chronological record
• Helps prevent and locate errors
• Provides explanation and identifies the source document

Question 10

Chart of Accounts

Answer 10

List of accounts and their account numbers
- Indicates where accounts are found in the ledger
- Usually starts with balance sheet accounts, followed by income statement accounts

Question 11

The Ledger

Answer 11

entire group of accounts maintained by a company

Question 12

Posting

Answer 12

procedure of transferring journal
entries to the ledger accounts

Question 13

The first three steps in the accounting cycle:

Answer 13

1. Analyze business transactions
   – Determine effect on accounts
2. Enter transactions in a journal
   – The book of original entry
3. Transfer journal information to ledger accounts