2.8: Discussion Questions

1. Why is the use of a transactions worksheet impractical in actual practice?
2. What is an 'account'? How are debits and credits used to record transactions?
3. Some tend to associate "good" and "bad" or "increase" and "decrease" with credits and debits. Is this a valid association? Explain.
4. The pattern of recording increases as debits and decreases as credits is common to asset and expense accounts. Provide an example.
5. The pattern of recording increases and credits and decreases as debits is common to liabilities, equity, and revenue accounts. Provide an example.
6. Summarise the rules for using debits and credits to record assets, expenses, liabilities, equity, and revenues.
7. What is a Trial Balance? Why is it prepared?
8. How is a Trial Balance used to prepare financial statements?
9. A General Journal is often called a book of original entry. Why?
10. The positioning of a debit-credit entry in the General Journal is similar in some respects to instructions written in a computer program. Explain, using an example.
11. What is a General Ledger? Why is it prepared?
12. What is a Chart of Accounts? How are the accounts generally arranged and why?
13. List the steps in the accounting cycle.