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