Accounting 1 Final

Checking Account

A bank account from which payments can be ordered by a depositor.

Debit Card

A bank card that, when making purchases, automatically deducts the amount of the purchase from the checking account of the cardholder.

Transaction

A business activity that changes assets, liabilities, or owner's equity.

Proprietorship

A business owned by one person.

Source Document

A business paper from which information is obtained for a journal entry.

Service Business

A business that performs an activity for a fee.

Expense

A decrease in owner's equity resulting from the operation of a business.

Income Statement

A financial statement showing the revenue and expenses for a fiscal period.

Invoice

A form describing the goods or services sold, the quantity, and the price.

Journal

A form for recording transactions in chronological order.

Memorandum

A form on which a brief message is written describing a transaction.

Petty Cash Slip

A form showing proof of a petty cash payment.

Ledger

A group of accounts.

Correcting Entry

A journal entry made to correct an error in the ledger.

Chart of Accounts

A list of accounts used by a business.

Accounting System

A planned process for providing financial information that will be useful to management.

Objective Evidence

A source document is prepared for each transaction.

Post-Closing Entries

A trial balance prepared after the closing entries are posted.

T Account

An accounting device used to analyze transactions.

Petty Cash

An amount of cash kept on hand and used for making small payments.

Liability

An amount owed by a business.

Debit

An amount recorded on the left side of a T account.

Credit

An amount recorded on the right side of a T account.

Blank Endorsement

An endorsement consisting only of the endorser's signature.

Special Endorsement

An endorsement indicating a new owner of a check.

Restrictive Endorsement

An endorsement restricting further transfer of a check's ownership.

Adjustments

Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period.

Equities

Financial rights to the assets of a business.

Going Concern

Financial statements are prepared with the expectation that a business will remain in operation indefinitely.

Adequate Disclosure

Financial statements contain all information necessary to understand a business' financial condition.

File Maintenance

The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current.

Dishonored Check

A check that a bank refuses to pay.

Postdated Check

A check with a future date on it.

Work Sheet

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.

Electronic Funds Transfer

A computerized cash payments system that uses electronic pulses to transfer funds.

General Journal

A journal with two amount columns in which all kinds of entries can be recorded.

General Ledger

A ledger that contains all accounts needed to prepare financial statements.

Trial Balance

A proof of the equality of debits and credits in a general ledger.

Permanent Accounts

Accounts used to accumulate information from one fiscal period to the next.

Temporary Accounts

Accounts used to accumulate information until it is transferred to the owner's capital account.

Accounting Equation

An equation showing the relationship among assets, liabilities, and owner's equity.

Revenue

An increase in owner's equity resulting from the operation of a business.

Sales Invoice

An invoice used as a source document for recording a sale on account.

Asset

Anything of value that is owned.

Withdrawals

Assets taken out of a business for the owner's personal use.

Unit of Measure

Business Transactions are stated in numbers that have common values; that is, using a common unit of measure.

Entry

Information for each transaction recorded in a journal.

Double-Entry Accounting

The recording of debit and credit parts of a transaction.

Receipt

A business form giving written acknowledgement for cash received.

Check

A business form ordering a bank to pay cash from a bank account.

Balance Sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

Account

A record summarizing all the information pertaining to a single item in the accounting equation.

Bank Statement

A report of deposits, withdrawals, and bank balances sent to a depositor by a bank.

Sale On Account

A sale for which cash will be received at a later date.

Endorsement

A signature or stamp on the back of a check transferring ownership.

Accounting Period Cycle

Changes in financial information are reported for a specific period of time in the form of financial statements.

Proving Cash

Determining that the amount of cash agrees with the balance of the cash account in the accounting records.

Business Entity

Financial information is recorded and reported separately from the owner's personal financial information.

Adjusting Entries

Journal entries recorded to update general ledger accounts at the end of a fiscal period.

Closing Entries

Journal entries used to prepare temporary accounts for a new fiscal period.

Accounting Records

Organized summaries of a business' financial activities.

Accounting

Planning, recording, analyzing, and interpreting financial information.

Journalizing

Recording transactions in a journal.

Matching Expenses with Revenue

Revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period.

Capital

The account used to summarize the owner's equity in a business.

Account Balance

The amount in an account.

Owner's Equity

The amount remaining after the value of all liabilities is subtracted from the value of all assets.

Net Loss

The difference between total revenue and total expenses when total expenses is greater.

Net Income

The difference between total revenue and total expenses when total revenue is greater.

Fiscal Period

The length of time for which a business summarizes and reports financial information.

Account Title

The name given to an account.

Account Number

The number assigned to an account.

Component Percentage

The percentage relationship between one financial statement item and the total that includes that item.

Consistent Reporting

The same accounting procedures are followed in the same way in each accounting period.

Accounting Cycle

The series of accounting activities included in recording financial information for a fiscal period.

Normal Balance

The side of the account that is increased.

Posting

Transferring information from a journal entry to a ledger account.

Opening an Account

Writing an account title and number on the heading of an account.