Chapter 02 - The Accounting Cycle: During the Period

These flashcards cover key concepts from Chapter 02 regarding the accounting cycle during the period, including the basic accounting equation, types of transactions, and processes for recording and reporting financial activities.

Basic Accounting Equation

The fundamental accounting equation states that Assets = Liabilities + Stockholders' Equity.

External Transactions

Transactions between the company and separate economic entities.

Debits

Entries in accounting that increase asset or expense accounts, and decrease liability or equity accounts.

Credits

Entries in accounting that increase liability or equity accounts, and decrease asset or expense accounts.

General Ledger

A complete record of all financial transactions over the life of a company, providing the balance of each account.

Trial Balance

A list of all accounts and their balances at a particular date, used to verify that total debits equal total credits.

Retained Earnings

A component of stockholders' equity that reflects the accumulated profits not distributed as dividends.

Journal Entry

The record of a transaction in accounting, showing debits and credits in the appropriate accounts.

Revenue

Income earned from providing goods or services to customers, which increases retained earnings.

Dividends

Payments made to shareholders from a corporation's earnings, which decrease retained earnings.