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accounting

QuestionAnswer
Accountanese The language that is spoken by the accounting profession
Accounting The language of business. It provides information that is needed about the monetary activities of a business, processes that information into useful reports called financial statements and communicates the results to the people who need them.
Accounting Cycle The steps that are necessary to accomplish the objectives of accounting during a fiscal period.
Accounts Payable Money a company owes to someone outside the company (a creditor)and is expected to be paid within a short period of time.
Accounts Receivable Money that is owed by someone outside the company(owed to the business by one of its customers) and is expected to be collected within a short period of time.
Analyze Determine how a business transaction has affected the accounting records of a business. It means to look at something and determine what it represents or what it means.
Bookkeeping The recording phase of the accounting process.
Business Transaction An exchange between the business and someone else. Something comes into the business and something goes out of the business.
Closing process The procedure needed at the end of an accounting cycle to prepare for the next accounting cycle.
Cost principle Items in accounting are recorded at their actual cost.
Entity concept Financial records kept separately for each economic unit.
Financial accounting Provides information for uses outside of the company
Financial Statements The reports prepared to help people judge the success and future success of a business.
Financial statement (4) Income statement, statement of owner's equity, balance sheet, and statement of cash flows.
Fiscal period The length of time that it takes to go through the accounting cycle for a business, normally it is no longer than one year.
GAAP(abbreviation) Generally Accepted Accounting Principles.
GAAP These are the guidelines that the rules of accounting are based upon.
General Journal The first formal book that a business transaction is written in, considered the book of original entry. It is kept in date sequence and shows the results of the analysis of business transactions into debits and credits.
General Ledger The book of final Entry and contains the accounts that the business wants to keep financial records for. It is where the accounts of the business are kept in numerical order and shows the balance of each account.
Going concern Assumption A business is assumed to have an indefinite and continuous life.
Journalizing The process of writing the analysis(an entry) of a business transaction into the journal.
Managerial accounting Provides information for internal users
Monetary Concept(monetary unit concept) All business transactions must have a dollar amount assigned to them to be of use to the accounting function of a business.(assumes that the value of the dollar remains stable).
Net income Revenue earned minus operating expenses.
Permanent Accounts Accounts whose balances are carried from one fiscal period to the next.
Posting The process of transferring(sorting and summarizing) information from the general journal into the appropriate account found in the general ledger.
Record Step two of accounting cycle. It means to write down the analysis of the business transaction in the general journal.
Source Document A piece of paper that represents a business transaction.
Source Documents examples Sales invoice, checks and purchase orders.
Temporary accounts Accounts whose balances are closed at the end of each fiscal period.
Accounting Equation Assets = Liabilities + Owner's equity
Accrual Basis of accounting Recording revenues when they are earned and recording expenses when they are incurred, not necessarily when the cash exchanges hands.
Assets Items that can be owned and may be in the possession, use of or control of the business, these items have future economic benefit to the company such as cash, supplies, land, equipment, and accounts receivable.
Cash basis of accounting Recording revenues and expenses when cash exchanges hands and not considering when the revenue was earned or the expense incurred.
Corporation One of three types of business ownership. It is a seperate legal entity controlled by stockholders.
Creditor Someone who has a claim against the assets of a company.
Expenses costs incurred in the operation of a business that are necessary to earn revenue.
Investments Personal items that are owned by the owner of the business and are put into the business
Liabilities Amounts owed to people outside the business from business operations which include accounts payable, interest payable, taxes payable, and salaries payable.
Matching concept The basis around which accrual accounting operates. It recognizes expenses in the fiscal period in which they are incurred, not paid.
Operating Capital Cash, or other assets, invested by the owner into the business.
Owner's equity The amount the owner of the business is worth in the business, their capital.
Partnership One of three types of business ownership. It has two or more owners.
Revenue What the business earns from what it is in business to do.
Revenue recognition Recording revenue in the period in which it is earned, not when the cash is received, when using the accrual basis of accounting.
Shift in assets When the assets of a business change their makeup as the result of a business transaction but the total assets remain the same.
Sole proprietorship Type of business ownership with only one owner.
Withdrawals Assets that the owners take from the business for personal use which are not considered expenses.
6 steps to accounting in order analyze,record,sort and summarize, record,report(close)
Always accounts Owner's equity accounts that cannot have amounts on both the debit and credit sides. Capital & Revenue are always credit. Drawing and Expenses are always debits.
Balance side The side of the accounting equation that an account would appear on, in which it determines whether the account has a normal debit balance or a normal credit balance.
chart of accounts the official listing that names the accounts that may be used in analyzing business transactions or an official list of accounts, by number that the business uses to record its transactions.
Credit The right side of T accounts, journal amount columns, and ledger amount columns
Debit The left side of T accounts, journal amount columns and ledger amount columns.
Double - entry accounting The accounting process in which every entry must have two parts, a debit and a credit.
Prepaid Expense Items that are assets when bought and become operating expenses when they are used in the running of the business.
T- account A form shaped like the letter T, used as a tool when analyzing business transactions.
Compound entry An entry that contains more than one debit/and or more then one credit.
Cross-referencing Putting into the post reference column the journal the account number of the ledger account that an amount has been posted to. This completes the posting process.
Four column account The type of ledger account that provides a running balance after individual debits and credits are posted.
Slide The inadvertent addition or the deletion of a 0 to or from a number.
Transposition The reversing of two digits within a number.
Trial Balance A listing of accounts, with their balances, from the general ledger. The accounts are listed in numerical order. The total of the debit column and credit column must be equal.
Account form of balance Sheet A listing of balance sheet items, with the assets on the left side, and liabilities and owner's equity on the right side.
Balance Sheet A report showing the financial condition of the business on a specific date. It contains the accounts in the accounting equation: Assets=liabilities + owner's equity.
Income Statement A report showing the revenues earned and the expenses incurred for a period of time - the fiscal period.
Interrelated Each financial statement relies on the other for correctness and completeness.
Report The preparation and distribution of the financial statements.
Report form of balance sheet. A listing of the balance sheet items, with the assets presented above the liabilities and owner's equity. It is a like a written report with one paragraph under the text
Statement of owner's equity A report showing what the owner is worth in the business.
The three w's The three parts to the heading of all financial statements - who, what , and when
ISDO increase on the same side the balance is on and decrease on the opposite side the balance is on.
Source documents What is analyzed, examples are invoices, receipts, checks and checkstubs.
Business Transactions represent an exchange.
3 Basic financial Statements income statement, statement of owner's equity and the balance sheet
Investments into the business by the owner Investments always increase the owner's equity.
Withdrawals from the business, by the owner withdrawals always decrease the owner's equity
Revenues always increase the owner's equity
Expenses Always decrease the owner's equity.
What is a drawing? It is a withdrawal by the owner for personal use.
What is capital It shoes the owner's specific claim to the assets of the business.
t-account Most common method used to analyze business transactions.
Left What side is the debit on?
Right What side is the credit ?
Assets have debit balances
Liabilities and Owner's equity have credit balances.
I increase on the
S same side the balance is on
D Decrease on the
O Opposite side the balance is on.
Investments and Revenue Will always increase owner's equity
OE - drawing Always debit
OE- expenses Always debit
OE- Capital Always credit
OE- Revenue Always credit
Created by: trishadev
 

 



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