Financial Accounting Week 3 - 20773

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Request Description

Is it necessary to take physical inventory when using the perpetual system?

 What are some advantages of using the perpetual inventory system?

Describe how the perpetual inventory system works.

Define debit and credit and explain how assets, liabilities, common stock, retained earnings, revenues, expenses, and dividends are affected by (increased or decreased) by debits and by credits.

What are the two fundamental equality requirements of the double-entry accounting system?

Solution Description

What are the two fundamental equality requirements of the double-entry accounting system?

1. Asset must equal claim

2. Debts must equal credits

Plain and simple for every entry made there must be another entry to balance out the equation. Any Transaction requires ate least one debit and one credit to balance out the books, this helps to detect errors.