Financial & Managerial Accounting: Chapter 2 - Analyzing Transactions

These flashcards encapsulate key vocabulary terms and definitions from Chapter 2 of Financial & Managerial Accounting, focusing on analyzing transactions.

Account

A record that shows the increases and decreases in each accounting equation element.

Chart of Accounts

A list of accounts in a ledger, typically organized in the order they appear in financial statements.

Journalizing

The process of recording transactions in a journal, following the rules of debit and credit.

Double-Entry Accounting System

An accounting system that requires every transaction to be recorded in at least two accounts, with total debits equal to total credits.

T Account

An account form that resembles a 'T', showing debits on the left and credits on the right.

Debits

Entries on the left side of an account that represent increases in assets or decreases in liabilities.

Credits

Entries on the right side of an account that represent decreases in assets or increases in liabilities.

Unadjusted Trial Balance

A report that lists the balances of all accounts in a ledger to verify that total debits equal total credits.

Horizontal Analysis

A method of evaluating financial performance by comparing financial data over different reporting periods.

Posting

The process of transferring debits and credits from journal entries to their respective accounts in the ledger.

Assets

Economic resources owned by a business that are expected to provide future benefits.

Liabilities

Obligations of a business to transfer assets to third parties.

Stockholders’ Equity

The residual interest in the assets of the entity after deducting liabilities.

Revenues

Increases in assets or stockholders' equity from selling goods or services.

Expenses

Costs incurred to generate revenues, leading to a decrease in assets.

Trial Balance

A report that confirms whether total debits equal total credits to identify errors in the accounting records.

Error Correction

The process of identifying and rectifying mistakes in journal entries or account balances.