Accounting Chapters 4,5,9

Income Before Income Taxes

Calculated by subtracting all expenses excluding taxes from revenue

petty cash

A fund containing a small amount of cash that is used to pay for minor expenditures.

Closing Journal Entry

A journal entry that transfers net income or loss to the Retained Earnings account

Adjusted Trial Balance

A list of accounts and their balances after all adjustments have been made

Sarbanes-Oxley Act (SOX)

A set of laws established to strengthen corporate reporting in the United States; created in response to financial statement frauds that occurred in the early 2000s

Nonsufficient Funds

A situation that occurs when a check is returned to a depositor because the writer of the check did not have a bank available balance equal to or greater than the amount of the check.

Unadjusted Trial Balance

A trial balance prepared before adjusting entries are posted.

Deferral Adjustment

Adjustments needed when the reporting of an expense or revenue on the income statement has been postponed to a later period

Contra-Account

An account that is an offset to, or reduction of, another account

Loan Covenants

Bank-imposed restrictions on a borrower that enhance the chance of timely repayment

Segregation of Duties

Different individuals should be responsible for related activities. The responsibility for record-keeping for an asset should be separate from the physical custody of that asset.

EBITDA

Earnings before interest, taxes, depreciation, and amortization

Loss on Impairment

Is an Operating Expense that appears on the income statement

post-closing trial balance

Prepared to check that debits equal credits and that all temporary accounts have been closed.

bank reconciliation

Process of using both the bank statement and the cash accounts of a business to determine the appropriate amount of cash in a bank account, after taking into consideration delays or errors in processing cash transactions.

cash equivalents

Short-term, highly liquid investments that can be readily converted to a specific amount of cash and which are relatively insensitive to interest rate changes.

Carrying Value (Book Value)

The amount at which an asset or liability is reported after deducting any contra-accounts

Net Loss

The amount by which expenses exceed revenues.

Permanent Account

The balance sheet accounts that carry their ending balances into the next accounting period

Net Income

Total Revenues - Total Expenses

temporary accounts

Track only the current year's results and then are closed before the next year's activities are recorded

Deferred Revenue

a liability resulting from the receipt of cash before the recognition of revenue

voucher system

a network of approvals by authorized individuals, acting independently, to ensure that all disbursements by check are proper

Imprest System

a process that controls the amount paid to others by limiting the total amount of money available for making payments to others

Depreciation

a reduction in the value of an asset with the passage of time, due in particular to wear and tear.

Goodwill

amount paid for an existing business above the value of its other assets

Fixed Assets

assets that are relatively permanent, such as land, buildings, and equipment

restricted cash

cash that is not available for general use but instead is restricted for a particular purpose

Depreciable Cost

cost - salvage value

Adjusting Journal Entry

entries made in the general journal to record revenues that have been earned but not recorded and expenses that have been incurred but not recorded

Net Fixed Assets

gross fixed assets - accumulated depreciation

Cash

money or any instrument that banks will accept for deposit and immediate credit to a company's account, such as a check, money order, or bank draft

Accrual Adjustments

needed when a company has earned revenue or incurred an expense in the current period but has not yet recorded it because the related cash will not be received or paid until a later period

Internal Controls

the processes and procedures implemented to provide reasonable assurance that control objectives are met

Amortization

the reduction of a loan balance through payments made over a period of time

fraud

wrongful or criminal deception intended to result in financial or personal gain