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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. |
Created by:
Posiniv01
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