Accounting Chapter 5 and 6

Adjusting Entries

Journal entries recorded to update general ledger accounts at the end of a fiscal period. They are recorded on the next journal page following the page on which the last daily transactions for the month are recorded.

Accrual Basis of Accounting

Reporting income when it is earned and expenses when they are incurred. (GAAP)

Cash Basis of Accounting

Reporting income when the cash is received and expenses when the cash is paid. (Materiality)

Net loss

The difference between total revenue and total expenses when total expenses are 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 its financial information and reports its financial performance.

Preparing the Heading of a Work Sheet

1. Name of company 2. Name of report (Work Sheet) 3. Date of report (For month ended January 31, 2017)

Recording a Voided Check in the Journal

1. Record the date in the date column. 2. Write the word VOID in the account title column. 3. Write the check number in the Doc. No. column. 4. Place a check in the Post Ref. column. 5. Place a dash in both the debit and credit columns.

Checking Account

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

Debit Card

A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder.

Deposit Slip

A bank form which lists the checks, currency, and coins an account holder is adding to the bank account. A bank customer prepares a deposit slip each time cash or checks are depoisited in the bank account.

Non-Sufficient funds check (NSF)

A check dishonored by the bank because of insufficient funds in the account of the maker of the check. It is usually dishonored in one of 5 ways. 1. The check appears to be altered. 2. The signature of the person who signed it does not match the one on the signature card at the bank. 3. The amounts written in figures and words do not agree. 4. The check is post-dated. 5. The person who wrote the check has stopped payment on the check.

Dishonored Check

A check that a bank refuses to pay.

Voided Check

A check that cannot be processed because the maker has made it invalid. The word VOID is written in large letters across both the check and its stub.

Canceled Check

A check which has been paid by the bank.

Postdated Check

A check with a future date on it. Most banks will not accept postdated checks because money cannot be withdrawn from a depositor's account until the date on the check.

Work Sheet

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

Electronic Funds Transfer (EFT)

A computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents. A note is written on a memorandum to describe the transaction.

Income Statement

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

Balance Sheet

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

Fiscal Year

A fiscal period consisting of twelve consecutive months.

Petty Cash Slip

A form showing proof of a petty cash payment. It shows 7 things. 1. Petty cash slip number. 2. Date of petty cash payment. 3. To whom paid. 4. Reason for payment. 5. Amount paid. 6. The account in which amount is to be recorded. 7. Signature of person approving the petty cash payment.

Cash Over

A petty cash on hand amount is more than the recorded amount.

Cash Short

A petty cash on hand amount that is less than the recorded amount.

Trial Balance

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

Bank Statement

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

Endorsement

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

Petty Cash

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

Blank Endorsement

An endorsement consisting only of the endorser's signature. If it is lost or stolen, the check can be cashed by anyone who has the possession of it.

Special Endorsement

An endorsement indicating a new owner of a check. Only the person or business named in a special endorsement can cash, deposit, or further transfer ownership of the check.

Restrictive Endorsement

An endorsement restricting the further transfer of a check's ownership. Many businesses have a stamp prepared with a restrictive endorsement. It is stamped, or endorsed, to prevent unauthorized people from cashing it if it is lost or stolen.

Prepaid Expense

Cash paid for an expense in one fiscal period that is not used until a later period.

Adjustments

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