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VYC1 Accounting 1

VYC1 Principles of Accounting WGU

TermDefinition
accounting the process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties
accounting system a process designed to accumulate, classify, and summarize financial data
auditing the review of financial statements to assess their fairness and adherence to generally accepted accounting principles
auditor's report an independent accountant's review of a firm's financial statements
certified public accountant an independent accountant who provides accounting services to the public for a fee
corporation a publicly or privately owned business entity that is separate from its owners and has a legal right to own property and do business in its own name; stockholders are not responsible for the debts or taxes of the business
creditor one to whom money is owed
discussion memorandum an explanation of a topic under consideration by the Financial Accounting Standards Board
economic entity a business or organization whose major purpose is to produce a profit for its owners
entity anything having its own separate identity, such as an individual, a town, a university, or a business
exposure draft a proposed solution to a problem being considered by the Financial Accounting Board
financial statements periodic reports of a firm's financial position or operating results
generally accepted accounting principles (GAAP) accounting standards developed and applied by professional accountants
governmental accounting accounting work performed for a federal, state, or local governmental unit
international accounting the study of accounting principles used by different countries
management advisory services services designed to help clients improve their information systems or their business performance
managerial accounting accounting work carried on by an accountant employed by a single business in industry
partnership a business entity owned by two or more people who are legally responsible for the debts and taxes of the business
public accountants members of firms that perform accounting services for other companies
separate entity assumption the concept of keeping a firm's financial records separate from the owner's personal financial records
social entity a nonprofit organization, such as a city, public school, or public hospital
sole proprietorship a business entity owned by one person who is legally responsible for the debts and taxes of the business
Statements of Financial Accounting Standards accounting principles established by the Financial Accounting Standards Board
stock certificates that represent ownership of a corporation
stockholders the owners of a corporation; also called shareholders
tax accounting a service that involves tax compliance and tax planning
account payable amounts a business must pay in the future
accounts receivable claims for future collection from customers
assets property owned by a business
balance sheet a formal report of a business's financial condition on a certain date; reports the assets, liabilities, and owner's equity of the business
break even a point at which revenue equals expenses
business transaction a financial event that changes the resources of a firm
capital financial investment in a business
equity an owner's financial interest in a business
expense an outflow of cash, use of other assets, or incurring of a liability
fair market value the current worth of an asset or the price the asset would bring if sold on the open market
fundamental accounting equation the relationship between assets and liabilities plus owner's equity
income statement / profit and loss statement / statement of income and expenses a formal report of business operations covering a specific period of time;
liabilities debts or obligations of a business
net income the results of an excess of revenue over expenses
net loss the result of an excess of expenses over revenue
on account / charge account / open-credit account an arrangement to allow payment at a later date
owner's equity / proprietorship / net worth the financial interest of the owner of a business; also called proprietorship or net worth
revenue / income an inflow of money or other asset that results from the sales of goods or services or from the use of money or property
statement of owner's equity a formal report of changes that occurred in the owner's financial interest during a reporting period
withdrawals funds taken from the business by the owner for personal use
account balance the difference between the amounts recorded on the two sides of an account
accounts written records of the assets, liabilities, and owner's equity of a business
chart of accounts a list of the accounts used by a business to record its financial transactions
classification a means of identifying each account as an asset, liability, or owner's equity
credit an entry on the right side of an account
debit an entry on the left side of an account
double-entry system an accounting system that involves recording the effects of each transaction as debits and credits
drawing account a special type of owner's equity account set up to record the owner's withdrawal of cash from the business
footing a small pencil figure written at the base of an amount column showing the sum of the entries in the column
normal balance the increase side of an account
permanent account an account that is kept open from one accounting period to the next
slide an accounting error involving a misplaced decimal point
T account a type of account resembling a T, used to analyze the effects of a business transaction
temporary account an account whose balance is transferred to another account at the end of an accounting period
transposition an accounting error involving misplaced digits in an error
trial balance a statement to test the accuracy of total debits and credits after transactions have been recorded
accounting cycle a series of steps performed during each accounting period to classify, record, and summarize data for a business and to produce needed financial information
audit trail a chain of references that makes it possible to trace information, locate errors, and prevent fraud
balance ledger form a ledger account form that shows the balance of the account after each entry is posted
chronological order organized in the order in which the events occur
compound entry a journal entry with more than one debit or credit
correcting entry a journal entry made to correct an erroneous entry
general journal a financial record for entering all types of business transactions; a record of original entry
general ledger a permanent classified record of all accounts used in a firm's operation; a record of final entry
journal the record of original entry
journalizing recording transactions in a journal
ledger the record of final entry
posting transferring data from a journal to a ledger
account form balance sheet a balance sheet that lists assets on the left and liabilities and owner's equity on the right (see Report form balance sheet)
adjusting entries journal entries made to update accounts for items that were not recorded during the accounting period
book value that portion of an asset's original cost that has not yet been depreciated
contra account an account with a normal balance that is opposite of a related account
contra asset account an asset account with a credit balance, which is contrary to the normal balance of an asset account
depreciation allocation of the cost of a long-term asset to operations during its expected useful life
prepaid expenses expense items acquired, recorded,and paid for in advance of their use
report form balance sheet a balance sheet that lists the asset accounts first, followed by liabilities and owner's equity
salvage value an estimate of the amount that could be received by selling or disposing of an asset at the end of its useful life
straight-line depreciation allocation of an asset's cost in equal amounts to each accounting period of the asset's useful life
worksheet a form used to gather all data needed at the end of an accounting period to prepare financial statements
closing entries journal entries that transfer the results of operations (net income or net loss) to owner's equity and reduce the revenue, expense, and drawing account balances to zero
income summary account a special owner's equity account that is used only in the closing process that summarize the result of operations
interpret to understand and explain the meaning and importance of something (such as financial statements)
postclosing trial balance a statement that is prepared to prove the equality of total debits and credits after the closing process is completed
accounts receivable ledger a subsidiary ledger that contains credit customer accounts
charge-account sales sales made through the use of open-account credit or one of various types of credit cards
contra revenue account an account with a debit balance, which is contrary to the normal balance for a revenue account
control account an account that links a subsidiary ledger since its balance summarizes the balances of the accounts in the subsidiary ledger
credit memorandum a note verifying that a customer's account is being reduced by the amount of a sales return or sales allowance plus any sales tax that may have been involved
invoice a customer billing for merchandise bought on credit
list price an established retail price
manufacturing business a business that sells goods that it has produced
merchandise inventory the stock of goods a merchandising business keeps on hand
merchandising business a business that sells goods purchased for resale
net price the list price less all trade discounts
net sales the difference between the balance in the Sales account and the balance in the Sales Returns and Allowances account
open-account credit a system that allows the sale of services or goods with the understanding that payment will be made at a later date
retail business a business that sells directly to individual consumers
sales allowance a reduction in the price originally charged to customers for goods or services
sales journal a special journal used to record sales of merchandise on credit
sales return a firm's acceptance of a return of goods from a customer
Sales Return and Allowances a contra revenue account where sales returns and sales allowances are recorded; sales returns and allowances are subtracted from sales to determine net sales
schedule of accounts receivable a listing of all balances of the accounts in the accounts receivable subsidiary ledger
service business a business that sells services
special journal a journal used to record only one type of transaction
subsidiary ledger a ledger dedicated to accounts of a single type and showing details to support a general ledger account
trade discount a reduction from list price
wholesale business a business manufactures or distributes goods to retail businesses or large consumers such as hotels and hospitals
accounts payable ledger a subsidiary ledger that contains a separate account for each creditor
cash discount a discount offered by suppliers for payment received within a specified period of time
cost of goods sold the actual cost to the business of the merchandise sold to the customers
Freight In account an account showing transportation charges for items purchased
purchase allowance a price reduction from the amount originally billed
purchase invoice a bill received for goods purchased
purchase order an order to the supplier of goods specifying items needed, quantity, price, and credit terms
purchase requisition a list sent to the purchasing department showing the items to be ordered
purchase return return of unsatisfactory goods
Purchases account an account used to record cost of goods bought for resale during a period
purchases discount a cash discount offered to the customer for payment within a specified period
purchases journal a special journal used to record the purchase of goods on credit
receiving report a form showing quantity and condition of goods received
sales discount a cash discount offered by the supplier for payment within a specified period
sales invoice a supplier's billing document
schedule of accounts payable a list of all balances owed to creditors
Transportation In account see Freight In account
bank reconciliation statement a statement that accounts for all differences between the balance on the bank statement and the book balance of cash
blank endorsement a signature of the payee written on the back of the check that transfers ownership of the check without specifying to whom or for what purpose
bonding the process by which employees are investigated by an insurance company that will insure business against losses through employee theft or mishandling of funds
canceled check a check paid by the bank on which it was drawn
cash in accounting, currency, coins, checks, money orders, and funds on deposit in a bank
cash payment journal a special journal used to record transactions involving the payment of cash
cash receipts journal a special journal used to record and post transactions involving the receipt of cash
cash register proof a verification that the amount of currency and coins in a cash register agrees with the amount shown on the cash register audit tape
Cash Short or Over account an account used to record any discrepancies between the amount of currency and coins in the cash register and the amount shown on the audit tape
check a written order signed by an authorized person instructing a bank to pay a specific sum of money to a designated person or business
credit memorandum a form that explains any addition other than a deposit, to a checking account
debit memorandum a form that explains any deduction, other than a check, from a checking account
deposit in transit a deposit that is recorded in the cash receipts journal but that reaches the bank too late to be shown on the monthly bank statement
deposit slip a form prepared to record the deposit of cash or checks to a bank account
dishonored (NSF) check a check returned to the depositor unpaid because of insufficient funds in the drawer's account; also called an NSF check
drawee the bank on which a check is written
drawer the person or firm issuing a check
electronic funds transfer (EFT) an electronic transfer of money from one account to another
endorsement a written authorization that transfers ownership of a check
full endorsement a signature transferring a check to a specific person, firm, or bank
negotiable a financial instrument whose ownership can be transferred to another person or business
outstanding checks checks that have been recorded in the cash payments journal but have not yet been paid by the bank
payee the person or firm to whom a check is payable
petty cash analysis sheet a form used to record transactions involving petty cash
petty cash fund a special-purpose fund used to handle payments involving small amounts of money
petty cash voucher a form used to record the payments made from a petty cash fund
postdated check a check dated some time in the future
promissory note a written promise to pay a specified amount of money on a specific date
restrictive endorsement a signature that transfers a check to a specific party for a stated purpose
service charge a fee charged by a bank to cover the costs of maintaining accounts and providing services
statement of account a form sent to a firm's customers showing transactions during the month and the balance owed
commission basis a method of paying employees according to a percentage of net sales
compensation record see individual earnings record
employee a person who is hired by and works under the control and direction of the employer
Employee's Withholding Allowance Certificate (Form W-4) a form used to claim exemption (withholding) allowances
exempt employees salaried employees who hold supervisory or managerial positions who are not subject to the maximum hour and overtime pay provisions of the Wage and Hour Law
federal unemployment taxes taxes levied by the federal government against employers to benefit unemployed workers
hourly rate basis a method of paying employees according to a stated rate per hour
independent contractor one who is paid by a company to carry out a specific task or job but is not under the direct supervision or control of the company
individual earnings record an employee record that contains information needed to compute earning and complete tax reports
Medicare tax a tax levied on employees and employers to provide medical care for the employee and employee's spouse after each has reached age 65
payroll register a record of payroll information for each employee for the pay period
piece-rate basis a method of paying employees according to the number of units produced
salary basis a method of paying employees according to an agreed-upon amount for each week or month
Social Security Act a federal act providing certain benefits for employees and their families; officially the Federal Insurance Contributions Act
social security (FICA) tax a tax imposed by the Federal Insurance Act and collected on employee earnings to provide retirement and disability benefits
state unemployment taxes taxes levied by a state government against employers to benefit unemployed workers
tax-exempt wages earnings in excess of the base amount set by the Social Security Act
time and a half rate of pay for an employee's work in excess of 40 hours a week
wage-bracket table method a simple method to determine the amount of federal income tax to be withheld using a table provided by the government
workers' compensation insurance insurance that protects employees against losses from job-related injuries or illnesses, or compensates their families if death occurs in the course of the employment
Employer's Annual Federal Unemployment Tax Return, Form 940 preprinted government form used by the employer to report unemployment taxes for the calendar year
Employer's Quarterly Federal Tax Return, Form 941 preprinted government form used by the employer to report payroll tax information relating to social security, Medicare, and employee income tax withholding to the IRS
experience rating system a system that rewards an employer for maintaining steady employment conditions by reducing the firm's state unemployment tax rate
merit rating system see experience rating system
Transmittal of Wage and Tax Statements, Form W-3 preprinted government form submitted with Form W-2 to the Social Security Administration
unemployment insurance program a program that provides unemployment compensation through a tax levied on employers
Wage and Tax Statement, Form W-2 preprinted government form that contains information about an employee's earnings and tax withholdings for the year
withholding statement see Wage and Tax Statement, Form W-2
Created by: csmi384