CHAPTER TWO
The Accounting Process
Concept Self‐check
1. An account is an accounting record designed to classify and accumulate the
dollar effect of
... [Show More] financial transactions. In a simplified account called a T–
account, the term “debit” is used to describe the left side of the account,
while the term “credit” refers to the right side.
2. A T‐account shows increases and decreases in an account. It graphically
illustrates how a general ledger account functions.
3. The left side of a T‐account records debit entries and the right side records
credit entries.
4. A chart of accounts is a list of all general ledger accounts used in a business,
showing each account’s name and number. A common practice is to have the
accounts arranged in a manner that is compatible with the order of their use
in financial statements.
5. Increases in stockholders’ equity are recorded as a credit – for example,
issuing common stock, or recording revenue.
6. Decreases in stockholders’ equity are recorded as a debit – for example,
dividends or expenses are debits.
7. Assets, Expenses , Dividends Liabilities, Common Stock, Revenues
Increases are debited. Increases are credited.
Decreases are credited. Decreases are debited.
8. A trial balance is a list of each account contained in the general ledger of an
entity, together with its individual debit or credit balance. It is prepared in
order to establish the equality of debits with credits before the preparation
of the financial statements
9. A trial balance shows the totals of each revenue and expense account that
will appear on the income statement and the asset, liability, and
stockholders’ equity balances that will appear on the balance sheet, usually
in the order these accounts appear in the balance sheet and income
statement.
10. A general journal is a chronological record of an entity’s financial
transactions. It is often called a book of original entry because each
transaction is recorded in the general journal first before it is posted to the
entity’s accounts in the general ledger. [Show Less]