Bookkeeping and Accounting Flashcards

A company purchases equipment for $12,000 cash. How is this transaction recorded?

Answer: Debit Equipment $12,000; Credit Cash $12,000

Purchasing equipment increases the asset Equipment (debit) and decreases the asset Cash (credit).

Which financial statement shows a company's revenues and expenses over a period of time?

Answer: Income Statement

The Income Statement (Profit & Loss) summarizes revenues and expenses for a specific accounting period.

Accounts Receivable has a normal balance of:

Answer: Debit

Accounts Receivable is an asset account and all asset accounts have a normal debit balance.

What is the purpose of a bank reconciliation?

Answer: To match the company's cash book balance with the bank statement balance

A bank reconciliation identifies and explains differences between the company's cash records and the bank statement.

Under the accrual basis of accounting, revenue is recognized when:

Answer: It is earned, regardless of when cash is received

Accrual accounting requires revenue to be recognized when earned, not when payment is collected.

Which of the following is a liability account?

Answer: Unearned Revenue

Unearned Revenue represents cash received before services are performed, creating an obligation (liability) to the customer.

The double-entry bookkeeping system requires that:

Answer: Total debits must equal total credits for every transaction

The fundamental rule of double-entry bookkeeping is that for every transaction, total debits must equal total credits.