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Int. Acct. I
Ch. 2: The Accounting Information System
| Term | Definition |
|---|---|
| accounting information system | ollects and processes transaction data and then disseminates the information in financial statements to interested parties |
| general ledger accounting systems | software programs that integrate the various accounting functions related to sales, purchases, receivables, payables, cash receipts and disbursements, and payroll. |
| entry-level programs | comes in many different industry-specific versions, such as for restaurants, retailing, construction, manufacturing, or nonprofit. |
| enterprise resource planning (ERP) systems | typically used by manufacturing companies with more than 500 employees and $500 million in sales |
| robotic process automation (RPA) systems | designed to be user-friendly and help companies create efficiencies in their business processes |
| manual accounting systems | someone performs each of the steps in the accounting cycle by hand |
| debit (Dr.) | left side of account |
| credit (Cr.) | right side of account |
| debit balance | the total of the debit amounts exceeds the credits |
| credit balance | the credit amounts exceed the debits |
| double-entry accounting | double-entry system of recording transactions; a company records the dual (two-sided) effect of each transaction in appropriate accounts |
| accounting cycle | the procedures that companies use to record transactions and prepare financial statements |
| transactions | a business’s economic events recorded by accountants. Transactions may be external or internal. |
| external transactions | involve economic events between the company and some outside enterprise. |
| internal transactions | economic events that occur entirely within one company. |
| journal | referred to as the book of original entry |
| general journal | basic form of a journal, has spaces for dates, account tiles and explanations, references, and two amount columns: |
| journalizing | entering transaction data in the journal: The date of the transaction. The accounts and amounts to be debited and credited. A brief explanation of the transaction. |
| ledger | entire group of accounts maintained by a copmpany |
| general ledger | contains all the asset, liability, and stockholders' equity accounts |
| chart of accounts | lists the accounts and the account numbers that identify their location in the ledger |
| trial balance | a list of accounts and their balances at a given time |
| adjusting entries | journal entries that ensure that a company follows the revenue recognition and expense recognition principles |
| defer | to postpone or delay |
| deferrals | expenses or revenues that are recognized at a date later than the point when cash was originally exchanged, ex. prepaid expenses, unearned revenues |
| prepaid expenses | assets paid for and recorded before a company uses them |
| useful life | term of service |
| depreciation | the process of expensing (allocating the cost of an asset over its useful life in a rational and systematic manner; an estimate rather than a factual measurement of the expired cost. |
| accumulated depreciation-equipment | contra asset account |
| contra asset account | offsets an asset account on the balance sheet |
| book value | the difference between the cost and the related accumulated depreciation |
| unearned revenue | receiving cash before services are performed. a liability account |
| accrued revenues | revenues for services performed but not yet recorded at the statement date |
| accrued expenses | expenses incurred but not yet paid or recorded at the statement date |
| net realizable value | an amount that is expected to be received on the balance sheet |
| allowance for doubtful accounts | contra asset account; offsets, or subtracts from accounts receivable to reflect net realizable value of accounts |
| adjusted trial balance | proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments; primary basis for the preparation of financial statements |
| closing process | the balance of nominal (temporary) accounts to zero in order to prepare the accounts for the next period's transactions |
| Income summary | a suspense account that clears income statement items |
| owner's capital account and owner's drawings account | for proprietorships and partnerships |
| closing entries | the appropriate general ledger accounts |
| temporary accounts | revenues, expenses, and dividends |
| permanent accounts | assets, liabilities, and stockholders equity (common stock and retained earnings |
| post-closing trial balance | the trial balance after closing; only account permanent (real) balance sheet accounts |
| income statement | classifies amounts into such categories as gross profit on sales, income from operations, income before taxes, and net income |
| retained earnings statement | reconciles the balance of the retained earnings account from the beginning to the end of the period |
| balance sheet | a sheet that shows the financial condition of a company at the end of a period |
| accrual-basis accounting | recognize revenue when the performance obligation is satisfied and expenses in the period incurred, without regard to the time of receipt or payment of cash |
| strict cash basis | companies record revenue only when they receive cash; and record expenses only when they disperse cash |
| modified cash basis | a mixture of the cash basis and the accrual basis |
| Cash receipts from customers (A/R) | -beginning accounts receivable + Ending accounts receivable +revenue on an accrual basis |
| Cash receipts from customers (U/R) | +Beginning Unearned Service Revenue - Ending Unearned revenue |
| Cash paid for operating expenses (P/E) | +Beginning prepaid expenses - Ending prepaid expense = expenses on an accrual basis |
| Cash paid for operating expense (A/L) | -Beginning accrued liabilities + Ending accrued liabilities = expenses on an accrual basis |
| worksheet | electronic spreadsheet; often facilitates the end-of-period (monthly, quarterly, or annually) |
Created by:
ryanriggs18
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