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Worsham
Accounting Q1 terms
| Term | Definition |
|---|---|
| Account | a device for recording the changes (increases or decreases) in the fundamental accounting elements. |
| Accountant | one who is concerned with the design of the system of records, the preparation of the reports based upon the recorded data, and the interpretation of the reports. |
| Accounting | a language of business employed to communicate financial information based upon analyzing, recording, classification, summarization, reporting, and interpretation of financial data |
| Accounting cycle | the process involved in journalizing, posting to the ledger, taking a trial balance, preparing statements, making adjusting and closing entries, and preparing a post-closing trial balance. |
| Accounting equation | assets equal Liabilities plus Owner's Equity |
| Accounts payable | an unwritten promise by a creditors for property, such as merchandise, supplies, or equipment, purchased on credit, or for services received on credit |
| Accounts receivable | an unwritten promise by a customer to pay, at a later date, for goods sold or services rendered |
| Accrual accounting | recording in each fiscal period applicable expenses, whether paid or not, and income earned, whether collected or not |
| Adjusted trial balance | a trial balance taken after adjusting entries have been recorded |
| Adjusting entries | entries made at the conclusion of a fiscal period to bring accounts up to date |
| Assets | Property of monetary value owned by a business |
| Balance sheet | a formal financial statement illustrating the assets, liabilities, and owner's equity of a business as of a specific date |
| Bookkeeper | one who is involved in the process of recording financial information in a prescribed manner |
| Bookkeeping | the recording of financial information in a prescribed manner |
| Book value | the cost of a fixed asset less its accumulated depreciation |
| Source documents | the 1st record of a business transaction, such as check stubs, receipts, sales invoices, purchase invoices, cash register tape, etc |
| what are the other names for Capital? | net worth, owner's equity, proprietorship |
| Capital | the amount by which the total assets exceed the total liabilities of a business; an owner's financial interest in a business |
| Cash | Coins, currency (paper money), checks, credit cards receipts and money orders received from others, as well as money deposited in the bank |
| Cash basis accounting | an accounting practice in which revenue is not recognized in the accounting records until received and in which expenses are not recognized until paid |
| charts of accounts | a list of all account titles and the account numbers assigned to them |
| Closing entries | entries made at the end of each reporting period to transfer tbalances of the temporary owner's equity accounts to permanent owner's equity account and to reduce the balance in the temporary owner's equity accounts to 0 in preparation for the next account |
| Compound journal entry | an accounting entry that involves more that two accounts |
| Contra account (little brother) | An account designed to accumulate to accumulate totals to offset a related account |
| Credit | the right side of a standard account |
| Credit balance | a condition that occurs when the total of the credits in an account is larger than the total of the debits in that account |
| Debit | the left side of a standard account |
| Debit balance | a condition that occurs when the total of the debits in an account is larger than the total of the credits in that account |
| Depreciation | the loss in value of a fixed asset due to wear and tear and the passage of time; or, a method of matching the cost of a fixed asset against the revenues that the fixed asset will help produce during it useful life |
| Depreciation expense | that portion of the original cost of a fixed asset that is assigned as an expense to the reporting period expected to benefit from it use |
| Double entry accounting (bookkeeping) | the process of recording equal debits and credits for a single business transaction |
| Drawing account | a separate owner's equity account in which withdrawals of cash or other assets by the owner for personal use are recorded |
| Expenses | a decrease in assets, other than withdrawals by the owner, which results from efforts to produce revenues |
| General Journal | a book of original entry in which any business transactions is recorded in chronological order |
| Income (revenue) | an inflow of assets as a result of selling a product or providing a service |
| what is Income statement referred to? | profit and loss statement; statement of operations: operating statement |
| Income statement | a formal financial statement which present the income, expenses, and resulting net profit or net loss for a given period |
| Journal | any book of original entry |
| Ledger | a book of accounts in which data from transactions recorded in journals are posted and thereby summarized |
| Liabilities | any debts that a business owes |
| Net income (net profit) | the difference between gross profit and expenses when the gross profit is larger |
| Net los | the difference between gross profit and expense when expenses are larger |
| Original cost basis | The amount original paid for a depreciable asset |
| Permanent accounts | accounts that accumulate information across accounting period; all accounts reported on the balance sheet (DON'T CLOSE) |
| what are the permanent accounts? | assets, liabilities, capital |
| Post-closing balance | a work paper prepared after all temporary owner's equity accounts have been closed and all permanent accounts have been balanced and ruled, proving the equality of the debit and credits (LAST STEP IN ACCOUNTING CYCLE) |
| Posting | the transferal of data from the journal to the ledger |
| Prepaid expense | Items which are considered to be assets when acquired, but which will become expenses when consumed or expired |
| Salvage value | the estimated value of a fixed asset at the end of it useful life |
| Statement of net worth or statement of owner's equity | a formal financial statements which summarizes all of the changes in owner's equity during a specified period of time |
| Straight-line depreciation | a method in which the depreciable cost basis (original cost basis less salvage value) of an asset is apportioned equally over its estimated useful life expressed in terms of month or years. |
| Supplies | a type of asset that will be consumed as it used EX: embalming fluids |
| T accounts | a skeleton form of an account used for instructional purposes |
| Temporary accounts | accounts utilized to accumulated income, expenses and owner's withdrawals for one accounting period only.(CLOSE) |
| What are the temporary accounts? | revenue, expense, income summary, drawing |
| Transaction | any activity of a business enterprise that involves the exchange of values |
| Trial Balance | a work paper proving the equality of the debit and credit balances in the ledger |
| Useful life | the estimated determinable life of a fixed asset |
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