Accounting Vocab
Adjusting Depreciation
(Asset cost- salvage value)/useful life
Sole proprietorship
A business owned by one person
Partnership
A business owned by two or more persons
Income Statement
A financial statement that reports the company's revenues and expenses over an interval of time
Statement of Stockholders' Equity
A financial statement that summarizes the changes in stockholders' equity over an interval of time
Adjusted Trial Balance
A list of all accounts and their balances after we have updated account balances for adjusting entries
Post-closing trial balance
A list of all accounts and their balances at a particular date after we have updated account balances for closing entries
Trial Balance
A list of all accounts and their balances at a particular date, showing that debits equal total credits
Chart of Accounts
A list of all accounts names used to record transactions of a company
Permanent Accounts
All accounts that appear in the balance sheet; account balances are carried forward from period to period
Temporary Accounts
All revenues, expense, and dividend accounts; account balances are maintained for a single period and then closed (or zeroed out) and transferred to the balance of the Retained Earning account at the end of the period
Contra Account
An account with a balance that is opposite, or "contra," to that of its related accounts
Book Value
An asset's original cost less accumulated depreciation
Financial Accounting Standards Board (FASB)
An independent private-sector body with full-time voting members and a very large support staff
The primary purpose of a source document is to assist in:
Analyzing a transaction
Classified Balance Sheet
Balance sheet that group's a company's assets into current assets and long-term assets that separates liabilities into current liabilities and long-term liabilities
Revenue Recognition Principle
Companies record revenue at the time its earned
AdjustingUnearned Revenues
Debit a liability Or Credit a revenue
Suppliers
Determine the ability to pay for goods
General Ledger
Included all accounts used to record the company;s transactions
Stockholders' Equity
Owners claims to resources
Dividends
Payments to stockholders
Financial Statement
Periodic reports published by the company for the purpose of providing information to external users
Limited Liability
Prevents stockholders from being held personally responsible for the financial obligations of the corporation
Matching Principle
Recognize expenses in the same period as the revenues they help to generate
Credit
Right side of an account
Account
Summarizes all transactions related to a particular item over a period of time
Journal Entry
The format used for recording business transactions
Accounting Cycle
The full set of procedures used to accomplish this two-step measurement/communication process
External Transactions
Transactions the firm conducts with a separate economic entity
Investors
Want to make good decisions related to buying and selling the company's stock (shares of ownership)
Accrued Expense
When a company has incurred an expense but hasn't yet paid cash or recorded an obligation to pay
Accrued Revenue
When a company hasn't yet received cash or recorded an amount receivable
Rank the following steps applied in ethical decision making in the proper order beginning with the first step.
1. Identify the ethical issue and stakeholders 2. Specify the alternative course of action 3. Evaluate the courses of action in terms of their impact on stakeholders 4. Make a decision
The steps for measuring transactions
1. Use Source documents to identify accounts affected 2. Analyze the impact of the transaction on the accounting equation 3. Asses whether the transaction results in a debit or credit to account balances 4. Record the transaction in a journal 5. post the transaction to the general ledger
Journal
A chronological record of all transactions affecting a firm
Corporation
A company that is legally separate from its owners
Statement of Cash Flows
A financial statement that measures activities involving cash receipts and cash payments over an interval of time
Balance Sheet
A financial statement that presents the financial position of the company on a particular date
T-Account
A simplified form of a general ledger account with space at the top for the account title and with two sides for recording debits and credits
Accounting
A system od mainting a company's operation and communicating that information to decision makers
Liabilities
Amounts owed to creditors
Adjusting Accrued Expenses
Debit an expense Or Credit a liability
Adjusting Prepaid Assets/ Expenses
Debit an expense Or Credit a revenue
Adjusting Accrued Revenues
Debit and asset Or Credit a revenue
Competitors
Decide market share and profitability
Closing Entries
Entries that transfer the balances of all embarrass accounts (revenues, expenses, and dividends) to the balance of Retained Earnings account
Adjusted Entries
Entries used to record events that occur during the period but that have not yet been recorded by the end of the period
Internal Transactions
Events that affect the financial position of the company but do not include an exchange with a separate economic entity
True or False: A balance sheet is a list of all accounts and their balances showing that debits equals credits
False
Which of the following included all accounts used to record the company's transactions?
Ledger
Debit
Left side of an account
The purpose of a general ledger
List all accounts used in recording the company's transactions
Creditors
Make decisions related to lending money to the company
Financial accounting
Measures business activities of a company and then to communicate those measurements to external parties
The term "accounting cycle" refers to the full set of ______ utilized to measure and communicate business transactions to external decision makers
Procedures
Cash-basis Accounting
Record revenues at the time cash is received and expenses at the time cash is paid
Accural- basis Accounting
Record revenues when earned (revenue recognition) and expenses with related revenues (expense recognition)
Revenues
The amounts earned from selling products or services to customers
Prepaid Expenses
The costs of assets acquired in one period that will be expenses in a future period
Expenses
The costs of providing goods and services
Retained Earnings
The cumulative amount of net income, earned over the life of the company, that has been kept (retained) in the business rather than distributed to the stockholders as dividends (not retained)
Net Income
The difference between revenues and expenses
International Accounting Standards Board (IASB)
The global counterpart to the FASB
Depreciation
The process of allocating the cost of a long-term asset to expense over its useful life
Posting
The process of transferring the debit and credit information fro the journal to individual accounts in the general ledger
Accounting Equation
The relationship among the three measurement categories
Assets
The resources of a company
Generally Accepted Accounting Principles (GAAP)
The rules of financial accounting
Unearned Revenues
When a company receives cash in advance from a customer for products or services to be provided in the future