Question

1. The three categories of the accounting equation are:

2. Companies need a way to organize their accounts so they use a chart of accounts. Accounts starting

with 1 are usually Assets, 2 – Liabilities, 3 – Equity, 4 – Revenues, and 5 – Expenses. The second

and third digits in account numbers indicate:

3. A chart of accounts and a ledger are similar in that they both list the account names and account

numbers of the business. A ledger, though, provides the following:

4. With a double-entry you need to record the dual effects of each transaction. Every transaction affects

at least ____ accounts.

5. A T-account is a shortened form of each account in the ledger. The debit is on the ____ side, credit on

the _____ side, and the account name is shown on _____.

Answer 1

Answer 1.

The three categories of the accounting equation are assets, liabilities, and equity.

Answer 2.

Companies need a way to organize their accounts so they use a chart of accounts. Accounts starting with 1 are usually Assets, 2 - Liabilities, 3 - Equity, 4 - Revenues, and 5 - Expenses. The second and third digits in account number indicate where the account fits within the category.

Answer 3.

A chart of accounts and a ledger are similar in that they both list the account names and account numbers of the business. A ledger, though, provides more detail. It includes the increases and decreases of each account for a specific period and the balance of each account at a specific point in time.

Answer 4.

With a double-entry you need to record the dual effects of each transaction. Every transaction affects at least two accounts.

Answer 5.

A T-account is a shortened form of each account in the ledger. The debit is on the left side, credit on the right side, and the account name is shown on top.