Core double-entry bookkeeping concepts including debits, credits, ledgers, and the accounting cycle.
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- What is double-entry bookkeeping?
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A system where every transaction is recorded with at least two entries: a debit and a credit, maintaining the accounting equation.- State the basic accounting equation.
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Assets = Liabilities + Equity- What are the three main components of the accounting equation?
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Assets, Liabilities, and Equity.- What is a debit?
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An entry made on the left side of a T-account that increases assets, expenses, or drawing accounts, or decreases liabilities and equity accounts.- What is a credit?
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An entry made on the right side of a T-account that decreases assets, expenses, or drawing accounts, or increases liabilities and equity accounts.- For asset accounts, which side of the T-account increases the balance?
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The debit (left) side.- For liability accounts, which side of the T-account increases the balance?
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The credit (right) side.- For equity accounts, which side of the T-account increases the balance?
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The credit (right) side.- What is a T-account?
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A simple visual representation of an account shaped like the letter T, with debits on the left and credits on the right.- Why is it called double-entry bookkeeping?
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Because every transaction affects at least two accounts: one account is debited and another is credited.- What is a journal entry?
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The initial recording of a transaction showing the date, accounts affected, amounts debited and credited, and an explanation.- What is a ledger?
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A collection of accounts showing all debits and credits for each account and the account balance.- What is posting?
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The process of transferring journal entry amounts to the corresponding accounts in the ledger.- What is a general ledger?
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The main ledger that contains all the accounts used by a business.- What is a subsidiary ledger?
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A ledger that contains detailed transactions for a specific category of accounts, such as accounts receivable or accounts payable.
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