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Finance Accounting 1

SSCT Finance Accounting

QuestionAnswer
Accounting the information system that identifies, records, and communicates the economic events of an organization to interested users.
Assets Resources a business owns
Balance Sheet A financial statement that reports the assets, liabilities, and owner's equity at a specific date.
Basic accounting equation Assets = liabilities + stockholder's equity
Bookkeeping A part of accounting that involves only the recording of economic events
Corporation A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock.
Cost Principle An accounting principle that states that companies should record assets at their cost.
Dividend A distribution by a corporation to its stockholders on a pro rata (equal) basis.
Economic entity assumption An assumption that requires that the activities of the entity be kep separate and distinct from the activities of its owner and all other economic entities.
Ethics The standards of conduct by which one's actions are judged as right or wrong, honest or dishonest, fair or not fair.
Expenses The cost of assets consumed or services used in the process of earning revenue.
Financial Accounting The field of accounting that provides economic and financial information for investors, creditors and other external users.
Financial Accounting Standards Board (FASB) A private organization that establishes generally accepted accounting principles.
FASB Financial Accounting Standards Board
Generally accepted accounting principles (GAAP) Common standards that indicate how to report economic events.
GAAP generally accepted accounting principles
Income Statement A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time.
International Accounting Standards Board (IASB) An accounting standard-setting body that issues standards adopted by many countries outside of the United States.
IASB International Accounting Standards Board
Liabilities Creditor claims on total assets
Managerial Accounting The field of accounting that provides internal reports to helop users make decisions about their companies.
Monetary unit assumption An assumption stating that companies include in the accounting records only transaction data that can be expressed in terms of money.
Net income The amount by which revenues exceed expenses
Net loss The amount by which expenses exceed revenues.
Partnership A Business owned by two or more persons associated as partners.
Proprietorship A business owned by one person.
Retained earnings statement A financial statement that summarizes the changes in retained earnings for a specific period of time.
Revenues The gross increase in owner's equity resulting from business activities entered into for the purpose of earning income.
Sarbanes-Oxley Act of 2002 (SOX) Law passed by Congress in 2002 intended to reduce unethical corporate behavior.
Securities and Exchange Commission (SEC) A government agency that requires companies to file financial reports in accordance with generally accepted accounting principles.
Statement of cash flows A financial statement that summarizes information about the cash inflows (receipts) and cash outflows (payments) for a specific period of time.
Stockholder's equity The ownership claim on a corporation's total assets.
Transactions The economic events of a business that are recorded by accountants.
Account A record of increases and decreases in specific asset, liability, or stockholders' equity items.
Chart of Accounts A list of accounts and the account numbers that identify their location in the ledger.
Common stock Issued in exhange for the owners investment paid in to the corporation.
Compound entry A journal entry that involves three or more accounts.
Credit The right side of an account.
Debit The left side of an account.
Dividend A distribution by a corporation to its stockholders on a pro rata (equal) basis.
Double-entry system A system that records in appropriate accounts the dual effect of each transaction.
General journal The most basic form of journal
General Ledger A ledger that contains all asset, liability, and stockholders' equity accounts.
Journal An accounting record in which transactions are initially recorded in chronological order.
Journalizing The entering of transaction data in the journal.
Ledger The entire group of accounts maintained by a company.
Normal Balance An account balance on the side where an increase in the account is recorded
Posting The transfer of journal entries to the ledge accounts.
Retained earnings Net income that is kep (retained) in the business.
Simple Entry A journal entry that involves only two accounts.
T account The basic form of an account.
Three-column form of account A form with columns for debit, credit, and balance amounts in an account.
Trial balance A list of accounts and their balances at a given time.
Accrual-basis accounting Acounting basis in which companies record transactions that change a company's financial statements in the periods in which the events occur.
Accruals Adjusting entries for either accrued revenues or accrued expenses.
Accrued expense Expenses incurred but not yet paid in cash or recorded.
Accrued revenues Revenues earned but not yet received in cash or recorded.
Adjusted trial balance A list of accounts and their balances after the company has made all adjustments.
Adjusting entries Entries made at the end of an accounting period to ensure that companies follow the revenue recognition and matching principles.
Book value The difference between the cost of a depreciable asset and its related accumulated depreciation.
Calendar year An accounting period that extends from January 1 to December 31.
Cash-basis accounting Accounting basis in which companies record revenue when they receive cash and an expense when they pay cash.
Contra asset account An account offset against an asset account on the balance sheet.
Deferrals Adjusting entries for either prepaid expenses or unearned revenues.
Depreciation The allocations of the cost of an asset to expense over its useful life in a rationa and systematic manner.
Fiscal year An accounting period that is one year in length.
Interim periods Monthly or quarterly accounting time periods.
Matching principle The principle that companies match efforts (expenses) with accomplishments (revenues)
Prepaid expenses Expenses paid in cash that benefit more than one accounting period and that are recorded as assets.
Revenue recognition principle The principle that companies recognize revenue in the accounting period in which it is earned.
Time period assumption An assumption that accountatns can divide the economic life of a business into artificial time periods.
Unearned revenues Cash received and recorded as liabilities before revenue is earned.
Useful life The length of service of a productive facility.
Classified balance sheet A balance sheet that contains a number of standard classifications or sections.
Closing entries Entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders equity account, Retained earnings
Correcting entries Entries to correct errors made in recording transactions
Current Assets Assets that a company expects to convert to cash or use up within one year.
Current Liabilities obligations that a company expects to pay from existing current assets within the coming year.
Income Summary A temporary account used in closing revenue and expense accounts.
Intangible assets Noncurrent assets that do not have physical substance.
Liquidity The ability of a company to pay obligations expected to be due within the next year.
Long-term investments Generally, investments in stocks and bonds of ther companies that companies normally hold for many years. Also includes long-term assets, such as land and buildings, not currently being used in operations.
Long-term liabilites Obligations that a company expects to pay after one year.
Operating cycle The average time that it takes to go from cash to cash in producing revenues
Permanent (real) accounts Accounts that relate to one or more accounting periods. Consist of all balance sheet accounts. Balances are carried forward to next accounting period.
Post-closing trial balance A list of permanent accounts and their balances after a company has journalized and posted closing entries.
Property, plant, and equipment Assets with relatively long useful lives, currently being used in operations.
Reversing entry An entry, made at the beginning of the next accounting period that is the exact opposite of the adjusting entry made in the previous period.
Stockholders' Equity The ownership claim of shareholders on total assets. It is to a coporation what owner's equity is to a proprietorship.
Temporary (nominal) accounts Accounts that relate only to a given accounting period. Consist of all income statement accounts and the Dividends account. All temporary accounts are closed at end of accounting period.
Worksheet A multiple-column form that may be used in making adjusting entries and in preparing financial statements.
Created by: dmdisme