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Accounting Ch2/3
Terms
Question | Answer |
---|---|
Account | A record of increases and decreases in a specific asset, liability, equity, revenue or expense item. |
Ledger | a record containing all accounts used by a company. |
Debtors | customers and others who owe a company. |
Creditors | individuals and organizations that have rights to receive payments from a company. |
Unearned Revenue | a liability that is settled in the futre when a company delivers its products or services. |
Source documents | identify and describe transactions and events entering the accounting process. |
Charts of accounts | a list of all ledger accounts and includes an identification number assigned to each account. |
Taccount | Represents a ledger account and is a tool used to understand the effects of one or more transactions. (Account Title, Debit, Credit) |
Debit | (DR) left side of Taccount, Increases. |
Credit | (Cr) right side of Taccount, Decreases. |
Account balance | the difference between total debits and total credits for an account, including any beginning balance. |
General Journal | Gives a complete record of each transaction in one place. Every company uses one. |
Journalizing | The process of recording transactions in a journal. |
Balance column accounts | Account with debit and credit columns for recording entries and another column for showing the balance of the account after each entry. |
Compound Journal entry | Journal entry that affects at least three accounts. |
Debt Ratio | Ratio of total liabilities to total assets, used to reflect risk associated with a company’s debts. |
Double Entry accounting | Accounting system in which each transaction affects at least two accounts and has at least one debit and one credit. |
Posting Reference column | A column in journals in which individual ledger account numbers are entered when entries are posted to those ledger accounts. |
Trial Balance | List of accounts and their balances at a point in time; total debit balances equal total credit balances. |
Time period assumption | Presumes that an organization's activities can be divided into specific time periods such as a montha three month quarter, a six month interval or a year. |
Accounting periods | Length of time covered by financial statements. |
Annual Financial Statements | Reports covering a 1 year period. |
Interium Financial Statements | covering one, three, or six months of activity. |
Fiscal year | Any 12 consecutive months. |
Natural business year | When sales activitites are at lowest level for the year. |
Accural basis accounting | uses the adjusting process to recognize revenues when earned and expenses when incurred (match with revenues) |
Cash Basis accounting | Recognizes revenues when cash is received and records expenses when cash is paid. |
Expense recognition(Matching Principle) | Record expenses in the same accounting period as the revenues that are earned as a result of those expenses. |
Adjusting entry | Made at the end of an accounting period to reflect a transaction or event that is not yet recorded. |
Plant assests | Longterm tangible assets used to produce and sell products and services. |
Depreciation | the process of allocating the costs of theses assets over their expected useful lives. |
Straight line depreciation | Allocates equal amounts of the assets net cost to depreciation during its useful life. |
Contra account | an account linked with another account it has an opposite normal balance. |
Book Value | Assets acquisition costs less its accoumulated depreciation. |
Accurred Expenses | refer to costs that are incurred in a period but are both unpaid and unrecorded. |
Accrued revenues | refer to revenues earned in a period that are both unrecorded and not yet recieved in cash or other assets. |
Unadjusted trial balance | a list of accounts and balances prepared before adjustments are recoreded. |
Adjusted trial balance | a list of account and balances prepared after adjusting entries have been recorded and posted to the ledger. |
Prepaid Expenses | Items paid for in advance of receiving their benefits; classified as assets. |
Profit Margin | Ratio of a company's net income to its net sales; the percent of income in each dollar revenue; also called net profit revenue. |
Unearned revenue | Liability create when customers pay in advance for products or services; earned when the products or services are later delivered. |