Accounting

Materiality:

A transaction is significant in such a way that it influences company decisions by size or nature.

Reliability:

All accounting information can be verified with objective evidence.

Matching Principle:

All revenues and expense must be recognized in the period they occurred.

The listing of all the accounts available for use in a company's accounting system is known as the

Chart of Accounts

Time Period Assumption:

Companies must break up their economic life into artificial time periods.

Monetary Unit Assumption:

Companies must only include transactions that can be expressed in terms of money.

Full Disclosure:

Companies must tell of all events that could make a difference to financial statement users.

What will usually cause the liability account Accounts Payable to increase?

Credit

Which term is associated with "right" or "right-side"?

Credit

When a company pays a bill, the account Cash will be

Credited

Entries to revenues accounts such as Service Revenues are usually

Credits

Which term is associated with "left" or "left-side"?

Debit

When cash is received, the account Cash will be

Debited

Entries to expenses such as Rent Expense are usually

Debits

Current Liabilities:

Debts that a company will pay off within one year.

All economic data is recorded in what?

Dollars

Under the accrual basis of accounting, expenses are reported in the accounting period when the

Expense matches the Revenues or is used up

The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the

Income statement

Revenues - expenses =__________.

Net Income

Realization of Revenue:

Revenue can only be recognized after services have been provided by a company.

Accounting Period Cycle:

The accounting concept assumes that the economic life of the business can be divided into time periods.

Faithful Representation:

The financial information provided matches the actual activities of the company; it is factual.

Relevance:

The financial information you will provide will make a difference in a decision.

Liabilities:

What a company owes creditors; creditor' claims to assets.

Assets:

What a company owns

Unit of Measure:

all economic data must be recorded in dollars.

What is Adjusted Trail Balance?

an unadjusted trial balance to which adjusting entries have been added.

Long-term Liabilities:

debts that a company will pay off in one year or more.

Assets minus liabilities equals __________.

stockholders' equity or owner's equity (net assets if a nonprofit)

Historical Cost Principle:

Companies record assets at their cost.

Fair Value Principle:

Companies should record assets at their fair value.

Going Concern:

Companies will continue operations into foreseeable future.

What will usually cause an asset account to increase?

Debit

Comparability:

Financial information can be linked to trends in a prior period or to industry norms.

Objective Evidence:

Financial information can be proved through analyzing, measuring, or researching.

Consistent Reporting:

Once an accounting method has been chosen by a company, that method must be followed from one period to the next without change.

Under the accrual basis of accounting, revenues are reported in the accounting period when the

Service or Goods have been devlivered

Economic Entity/ Business Entity Assumption:

all business activities must be kept separate from personal activities.

What's listed in an adjusted trail balance?

are listed in order of thier account number or in balance sheet starting with assets, liabilities, and equity accounts and ending with income and expense accounts.

Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as __________.

assets

Property, Plant, and Equipment:

assets that a company owns for a year or more; these amounts are usually related to an investment in the company (buildings, land, ect.)

Intangible Assets:

assets that do not have physical substance but still add value to the corporation.

Current Assets:

assets that will be used up within one year; these amounts are usually related to a company's day to day operations. (inventory, supplies, ect.)

Assets are usually reported on the balance sheet at which amount?

cost

What is Net Loss?

excess of expenses over revenues. All expenses are included in this calculation, including the effects of income taxes.

Unearned Revenues is what type of account?

liability

Obligations (amounts owed) are reported on the balance sheet and are referred to as __________.

liabillites

Liabilities often have the word __________ in their account title.

payable

What is Total Assets?

refers to the total amount of assets owned by a person or entity. Typical categories in which these assets may be found include: Cash Marketable securities Accounts receivable Prepaid expenses Inventory Fixed assets Intangible assets Goodwill Other assets

Accounting entries involve a minimum of how many accounts?

two

What is a capital Account?

used by sole proprietorships and partnerships to track the net investment balance of their owner(s) from the perspective of the business. In essence, the capital account contains the following transactions: + Investments made by the owner or partner + Subsequent profits of the business - Subsequent losses of the business - Subsequent draws paid to the owner or partner = Ending balance in the capital account

Conservatism:

Assets and income should be as low as possible so companies don't overstate and mislead anyone.

The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the

Balance Sheet