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accrual acct2

QuestionAnswer
financial accounting day-to-day and periodic measurement and reporting of accounting information for use by individuals outside or inside the firm
accounting methods accrual and cash
accrual accounting method revenue and expenses are recognized at the time they are earned or incurred, whether the revenue has actually been collected or the expenses actually been paid
cash accounting method whereby revenue and expense items are recognized in the time period in which the firm actually receives the cash or actually pays the bills
revenue amount of inflows from the sale of goods or renderings of services during an accounting period
expense amount of outflows of resources of a firm as a consequence of the efforts made by the firm to earn revenues
income statement formally reports all the revenues and expenses of a firm for a stated period of time. The result shows the net income(or loss) for the firm during the period; also called a profit and loss statement
profit and loss statement (P&L) income statement
"Pass through" when goods or services that are billed by the interior designer to the client or end user
Net income or profit that results when all expenses are subtracted from revenues. If the result is positive, net income represents the dollar amount of profit the firm has made for the given time period
gross revenue all the revenue, prior to any deductions, generated by the firm for a given accounting period
cost of sales refers to the costs paid in the direct generation of revenues. Called cost of goods sold in retail sales business; in this case, it refers to changes in inventory
gross margin difference between revenues and cost of sales. Represents the amount of revenue available to cover overheard expenses
direct labor time employees spend directly involved in the generation of firm revenues
direct expenses number that includes not only the salary of employees but also any cost of benefits, such as unemployment taxes, medical insurance, and paid holiday
overhead expenses expenses that are incurred whether the firm produces any revenues or not; also called selling and administrative expenses
balance sheet an accounting form that shows the financial position of a firm at a particular moment in time, including a statement of its assets and liabilities
assets any kind of resource -tangible or intangible- that a firm owns or controls and that can be measured in monetary terms
current assets resources that the firm would normally convert to cash in less than one year
fixed assets resources that are also called property, plant, and equipment, which are the long-lived items used by the firm
cash cash on hand in the firm's bank accounts, checking accounts, cash register, or petty cash boxes; considered a current asset
petty cash is currency used to purchase small or minor items, such as office supplies with cash on hand
accounts receivable what others owe to the firm as a result of the sale of or billing for goods and services
prepaid expense early payment of expenses in a period prior to their being required. The prepaid expense is an asset, since the value of the prepaid expense, not yet due, still as value to the owners
depreciation results from the concept that capital equipment has a limited useful life. It is intended to express the usage of a fixed asset in the firm's pursuit of revenue.
amortized result from the concept that the value of intangible assets, such as copyright, patent, and trademarks are reduced; similar to depreciation
liabilities amounts that the firm owes to others due to past transactions or events. always have first claim on the firm's assets
current liabilities are obligations that are due within one year or less.
accounts payable claims from suppliers for goods or services ordered but not yet paid for
accrued expenses expenses owed to others for a given time period but not yet paid;salary owed during an accounting period but not yet paid
deferred revenue revenue received for services that have not yet been rendered or the sale of goods that have not yet been delivered
owner's equity section on the balance sheet showing the amount the owners have invested in the firm
drawings in accounting, the withdrawals form the profits of a business by owners in proprietorships and partners
retained earnings claim on the assets arising from the cumulative, undistributed earnings of the corporation for use in the business after dividends are paid to stockholder
statement of cash flows accounting statements reporting, for a specific period, the changes in cash flows from operating, investing, and financing activities
transactions events that affects the financial activities of a firm, either as revenue generating or expense generating
single-entry systems simple bookkeeping system that is based on the income statement and includes business income and expense accounts
double-entry systems accounting system using information in the accounting journals and ledgers and in which the accounts are based on the entries found in both the income statement and the balance sheet
chart of accounts a list of all the accounts that a firm is using
accounts financial entries with different names for clarification to show additions and subtractions to the account
T-accounts amount of assets of a firm must always balance with the liabilities of the firm the account record looks like the letter T
debit in accounting, left-hand side of an account
credit in accounting, the right-hand side of account
journal a chronological record of all accounting transactions for a firm
posting transferring of a journal entry to the correct ledger account
Ledger is a group of accounts; often called a general ledger
trail balance a test to see if accounts are balanced and if all the account balances with the debit and credit side are totaled separately
cash management cash forecasting- estimates how much revenue will be realized each month and how much expenses will be for that same time period
work in process work under way for a client that has not yet been billed
Created by: soberbeck