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2.8: Discussion Questions
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- Why is the use of a transactions worksheet impractical in actual practice?
- What is an 'account'? How are debits and credits used to record transactions?
- Some tend to associate "good" and "bad" or "increase" and "decrease" with credits and debits. Is this a valid association? Explain.
- The pattern of recording increases as debits and decreases as credits is common to asset and expense accounts. Provide an example.
- The pattern of recording increases and credits and decreases as debits is common to liabilities, equity, and revenue accounts. Provide an example.
- Summarise the rules for using debits and credits to record assets, expenses, liabilities, equity, and revenues.
- What is a Trial Balance? Why is it prepared?
- How is a Trial Balance used to prepare financial statements?
- A General Journal is often called a book of original entry. Why?
- 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.
- What is a General Ledger? Why is it prepared?
- What is a Chart of Accounts? How are the accounts generally arranged and why?
- List the steps in the accounting cycle.