LEARNING OBJECTIVES - CHAPTER 2 LEARNING OBJECTIVES 1.DESCRIBE HOW AC...

Copyright © 2015John Wiley & Sons, Inc.Weygandt,Accounting Principles,12/e,Instructor’s Manual(For Instructor Use Only)2-1

CHAPTER 2

LEARNING OBJECTIVES

1.DESCRIBE HOW ACCOUNTS , DEBITS, AND CREDITS

ARE USED TO RECORD B USINESS TRANSACTIONS .

2.INDICATE HOW A JOURN AL IS USED IN THE

RECORDING PROCESS.

3.EXPLAINHOWA LEDGER AND POSTINGHELP IN

THE RECORDING PROCES S.

4.PREPARE A TRIAL BALANC E.

Accounting Principles 12th Edition Weygandt Solutions Manual Visit TestBankDeal.com to get complete for all chapters

Copyright © 2015John Wiley & Sons, Inc.Weygandt,Accounting Principles,12/e,Instructor’s Manual(For Instructor Use Only)2-2

CHAPTER REVIEW

The Account 1.(L.O. 1)Anaccountis an individual accounting record of increases and decreases in a specific asset, liability, or owner’s equity item.

2.In its simplest form, an account consists of (a) the title of the account, (b) a left or debit side, and (c) a right or credit side. The alignment of these parts resembles the letter T, and therefore the account form is called aT-account.Debits and Credits 3.The termsdebitandcreditmean left and right, respectively.a.The act of entering an amount on the left side ofan account is calleddebitingthe account and making an entry on the right side iscreditingthe account.b.When the debit amounts exceed the credits, an account has adebit balance;when the reverse is true, the account has acredit balance.

4.In adouble-entrysystem, equal debits and credits are made in the accounts for each transaction.Thus, the total debits will always equal the total credits.

5.The effects of debits and credits onassetsandliabilitiesand the normal balances are: Accounts Debits Credits Normal Balance Assets Increase Decrease Debit Liabilities Decrease Increase Credit 6.Accounts are kept for each of the four subdivisions of owner’s equity: capital, drawings, revenues, and expenses.

7.The effects of debits and credits on the owner’s equity accounts and the normal balances are: Accounts Debits Credits Normal Balance Owner’s CapitalDecrease Increase Credit Owner’s DrawingsIncrease Decrease Debit Revenues Decrease Increase Credit Expenses Increase Decrease Debit

8.The expanded accounting equation is:

Assets = Liabilities + Owner’s Capital–Owner’s Drawings + Revenues–Expenses TheJournal

9.(L.O.2)The basic steps in the recording process are:

a.Analyze each transaction for its effect on the accounts.b.Enter the transaction information in a journal.c.Transfer the journal information to the appropriate accounts in the ledger.

Copyright © 2015John Wiley & Sons, Inc.Weygandt,Accounting Principles,12/e,Instructor’s Manual(For Instructor Use Only)2-3 10.Transactions are initially recorded in a journal.a.A journal is referred to as a book of original entry.b.Ageneral journalis the most basic form of journal.

11.The journal makes several significant contributions to the recording process: a.It discloses in one place the complete effect of a transaction.b.It provides a chronological record of transactions.c.It helps to prevent or locate errors because the debit and credit amounts for each entry can be easily compared.

12.Entering transaction data inthe journal is known asjournalizing.When three or more accounts are required in one journal entry, the entry is known as acompound entry.The Ledger 13.(L.O.3)The ledger is the entire group of accounts maintained by a company. It keeps in one placeall the information about changes in account balances and it is a source of useful data for management.

14.Thestandard form of a ledger accounthas three columns and the balance in the account is determined after each transaction.

15.Postingis the procedure of transferring journal entries to the ledger accounts. The following steps

are used in posting:

a.In the ledger, enter in the appropriate columns of the account(s) debited the date, journal page, and debit amount.b.In the reference column of the journal, write the account number to which the debit amount was posted.c.Perform the same steps in a. and b. for the credit amount.The Chart of Accounts 16.Achart of accountsis a listing of the accounts and the account numbers which identify their location in the ledger. The numbering system usually starts with the balance sheet accounts and follows with the income statement accounts.

Copyright © 2015John Wiley & Sons, Inc.Weygandt,Accounting Principles,12/e,Instructor’s Manual(For Instructor Use Only)2-4 The Basic Steps

17.The basic steps in the recording process are illustrated as follows:

Transaction On September 4, Fesmire Inc. pays $3,000 cash to a creditor in full payment of the balance due.Basic analysisThe liability Accounts Payable is decreased $3,000, and the asset Cash is decreased $3,000.

Debit-credit Debits decrease liabilities: debit Accounts Payable $3,000.

analysis Credits decrease assets: credit Cash $3,000.

The Trial Balance 18.(L.O.4)Atrial balanceis a list of accounts and their balances at a given time. The trial balance proves the mathematical equality of debits and credits after posting.

19.A trial balance does not prove that the company has recorded all transactions or that the ledger is correctbecause the trial balance may balance even when a.a transaction is not journalized.b.a correct journal entry is not posted.c.a journal entry is posted twice.d.incorrect accounts are used in journalizing or posting.e.offsetting errors are made in recording the amount of a transaction.