What is the accounting equation?
Assets = Liabilities + Equity
The accounting equation must always balance, reflecting the relationship between a company’s resources and claims against those resources.
What is double-entry bookkeeping?
A system where every financial transaction affects at least two ledger accounts, maintaining the balance in the accounting equation.
Double-entry bookkeeping ensures that the total debits equal total credits, keeping the accounting equation in balance.
How does bookkeeping differ from accounting?
- Bookkeeping: Recording transactions in the accounting system.
- Accounting: Involves system design, financial statement preparation, auditing, and analysis for business decisions.
Bookkeeping is a subset of accounting, focusing on the initial steps of the accounting cycle.
What is the purpose of the Chart of Accounts?
A list of all ledger accounts available for recording transactions, organized by account type and number.
The Chart of Accounts helps in systematically categorizing financial transactions for accurate reporting and analysis.
What is the general ledger?
The full group of ledger accounts containing all recorded financial transactions needed to produce financial statements.
The general ledger includes all transaction data and is used to investigate transactions and locate errors.
How do debits and credits affect asset accounts?
- Debits increase asset accounts.
- Credits decrease asset accounts.
Debits and credits are used to record changes in account balances, with their effects depending on the type of account.
How do debits and credits affect liability and equity accounts?
- Debits decrease liability and equity accounts.
- Credits increase liability and equity accounts.
Understanding the impact of debits and credits on different account types is crucial for maintaining accurate financial records.
What is a contra account?
An account that carries a balance opposite to the normal balance for its type, used to decrease the value of another account.
Contra accounts help preserve historical balances while adjusting the current book value.
What are the steps in the accounting cycle?
- Identify financial events.
- Record transactions in the General Journal.
- Post to ledger accounts.
- Prepare unadjusted trial balance.
- Make adjusting entries.
- Prepare adjusted trial balance.
- Prepare financial statements.
- Prepare and post closing entries.
The accounting cycle is a systematic process for managing accounts throughout a fiscal year.
What is the normal account balance for asset accounts?
Debit
Asset accounts typically have a debit balance, meaning debits to the account exceed credits.
What is the normal account balance for liability and equity accounts?
Credit
Liability and equity accounts typically have a credit balance, meaning credits to the account exceed debits.
What is the first step in the accounting cycle?
Analyze transactions and events to determine their impact on financial statements.
What is the purpose of recording transactions in the General Journal?
To document financial transactions in chronological order before posting them to ledger accounts.
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Accounting Foundations & Terminology46
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Recording Transactions & the Accounting Cycle13
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T-Accounts and Journalizing10
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Business Transactions in Practice14
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Trial Balances and Comprehensive Income6
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Subsidiary Ledgers and Revenue Examples24
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Advanced Transactions and Adjusting Entries21
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Adjusted Trial Balance to Year-End Close36
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Financial Statement Types and Elements28
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Statement of Cash Flows18
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Internal Controls18
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Managing Daily Finances45
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Valuing Assets, Liabilities & Equity42
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Revenue Recognition & Income Measurement12
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Financial Statement Analysis8
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Financial Ratios Overview43
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Budgeting Principles and Practices23
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Budgeting Methodologies and Cycles16
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Master Budget & Supporting Schedules24
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Cost Classifications & Costing Systems29
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Manufacturing Overhead and ABC22
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Variance Analysis23
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Performance Measurement & Decision Making27
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Business Ethics & Professional Conduct40
