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Int. Acct. I
Ch. 0: Analyze Business Transactions
| Term | Definition |
|---|---|
| accounting transactions | events that require recording in the financial statements |
| accounting equation | Assets = Liabilities + Stockholders' Equity |
| transaction analysis | the process of identifying the specific effects of economic events on the accounting equation |
| account | an individual accounting record of increases and decreases in a specific asset, liability, stockholders' equity, revenue, or expense item |
| T-account | contains three parts: (1) the title of the account, (2) a left or debit side, and (3) a right or credit side; the three parts resembles the letter T |
| debit | left side of an account (Dr.) |
| credit | the right side of an account (Cr.) |
| debiting | act of entering an amount on the left side of an account |
| crediting | act of entering an amount on the right side of an account |
| debit balance | the total of the debit amounts exceeds the credits |
| credit balance | the credit amounts exceed the debits |
| double-entry system | the two-sided effect of each transaction is recorded in appropriate accounts with each transaction affecting two or more accounts |
| asset accounts | normally show debit balances |
| liability accounts | normally show credit balances |
| normal balance | the side where increases in the account are recorded |
| common stock | issued to investors in exchange for the stockholders' investment. |
| retained earnings | net income that is retained in the business |
| dividend | a distribution by a corporation to its stockholders |
| source document | documents that show evidence of the transaction, such as a sales slip, a check, a bill, or a cash register document |
| journal | transactions are initially recorded in chronological order before they are transferred to the accounts |
| general journal | basic form of journal that discloses in one place the complete effect of a transaction, provides chronological record, and helps to prevent and locate errors |
| journalizing | entering the transaction data in the journal |
| ledger | the entire group of accounts maintained by a company; provides the balance in each of the accounts as well as keep track of changes in these balances |
| general ledger | contains all the asset, liability, stockholders' equity, revenue, and expense accounts |
| chart of accounts | list of accounts use in the ledger |
| posting | the procedure of transferring journal entry amounts to ledger accounts |
| trial balance | lists accounts and their balances at a given time |
| periodicity assumption | time periods that are generally a month, a quarter, or a year |
| revenue recognition principle | requires companies to recognize revenue in the accounting period in which the performance obligation is satisfied |
| expense recognition (matching) principle | efforts (expenses) be matched with results (revenues) |
| accrual-basis accounting | transaction that change a company's financial statements are recorded in the periods in which the events occur, even if cash was not exchanged |
| cash-basis accounting | companies record revenue at the time they receive cash. |
| adjusting entries | ensure that revenue recognition and expense recognition principles are followed; include one income statement account and one balance sheet account |
| prepaid expenses or prepayments | deferred expense; expenses paid in cash before they are used or consumed |
| depreciation | the process of allocating the cost of an asset to expense over its useful life |
| accumulated depreciation | contra asset account; an offset against an asset account on the balance sheet |
| book (carrying value) | the difference between the cost of any depreciable asset and its related accumulated depreciation |
| unearned revenues | record cash received before services are performed by increasing (crediting) a liability account |
| accrued revenues | revenues for services performed but not yet recorded at the statement date |
| adjusted trial balance | trial balance with the adjusting entries |
| temporary (nominal) accounts | revenues, expenses, and dividends, relate only to a given accounting period |
| permanent (real) accounts | balance sheet accounts |
| closing entries | transfer net income or loss to retained earnings so they agree with retained earnings statement |
| income summary | temporary account in which to close revenues and expenseses |
| post-closing trial balance | a trial balance after the closing entries |
Created by:
ryanriggs18
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