Principles of Accounting: Chapter Two

Home

Chapter 2 reveals the fundamental tools that are central to virtually every accounting system. These tools allow for the accumulation and processing of business information. They consist of accounts, debits and credits, journals, and ledgers. Without these tools the preparation of financial statements would prove difficult, whether in a manual or computerized environment. The chapter concludes with a glimpse into the nature of computerized processing, as well as simple tools of analysis known as "T-accounts."

Included in this chapter are the basic "debit/credit" rules. Gaining a full grasp of them will enable the study of accounting to proceed more effectively. Debits and credits are used to describe the effect of transactions on accounts (e.g., asset accounts are increased with debits). Each transaction is analyzed to determine its debit/credit effect and these effects are recorded into a book of original entry known as a journal. Periodically, the information in the journal is posted to ledger accounts, which can then be summarized into a trial balance. The trail balance is a useful compilation from which financial statements might be prepared.

Exercises

To aid in your understanding of this chapter, exercises with solutions are available for free download at Bookboon.com. You will find these exercises very helpful in providing models and guidelines for solving all of the problems at principlesofaccounting.com.

Click here to go to Bookboon.

Problems
Goals Achievement
Fill in the Blanks
Multiple Choice
Objectives
Key Terms

Problems: Chapter Two

Obtain the entire Accounting Cycle Problem Workbook via the linked image at left. Our high volume production process makes this an economical option as compared to printing these files on your own printer!



Basic		Problem	Worksheet	Combined	Objective

	B-02.01				Understanding the basic "tools" of accounting

	B-02.015				Conceptual awareness of accounting tools

	B-02.017				Determining account type and normal balance

	B-02.02				Debit/Credit rules and normal balances

	B-02.03				Basic journal entries

	B-02.04				Determining the nature of transactions by examination of entries

	B-02.05				Posting entries to the ledger

	B-02.06				Trial balance preparation

	B-02.07				The value of a chart of accounts

	B-02.08				T accounts -- an analytical tool

	B-02.09				Understanding subsidiary ledger concepts



Involved		Problem	Worksheet	Combined	Objective

	I-02.01				Preparing journal entries, posting, and a trial balance

	I-02.02				Processing transactions into financial reports

	I-02.03				Team-based approach to learn about information processing

	I-02.04				Comprehensive processing exercise (with beginning balances)

	I-02.05				Determining missing values from a limited information set

	I-02.06				Evaluation of errors and corrections

	I-02.07				Computerized processing

	I-02.08				Using T-accounts to evaluate business activity

The preceding table includes links to "Basic" and "Involved" problems. Each link will download the file containing a spreadsheet for the problem and a template worksheet on which you can prepare the solution electronically. If you see a light bulb icon on a worksheet, just mouse over above the icon and a comment box will appear. The comments include useful suggestions for improving your spreadsheet skills.

Solutions to these problems may be obtained from your instructor, however you may not post or redistribute, electronically or otherwise, any such solution material. Solution material may be provided to you for your sole use only, at the discretion of your individual instructor. Violation of this policy constitutes a copyright violation. Alternative problems, with solutions, may be found under the "Exercises" tab within each chapter. Video solutions to selected problems are available to students enrolling in the online course.