Accounting I terms and definitions to know to prepare for FBLA

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Term

Definition

Return on investment

The ration of the money earned on an investment

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Real property

Land and anything attached to land

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Personal property

All property not classified as real property

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Assessed Value

The value of an asset determined by tax authorities for the purpose of calculating taxes.

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Plant asset record

an accounting form on which a business records information about each plant asset

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Gain

An increase in equity resulting from activity other than selling goods or services

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Gain on plant assets

An increase in equity that results when a plant asset is sold for more than book value

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Loss

A decrease in equity resulting from activity other than selling goods or services

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Loss on plant assets

A decrease in equity that results when a plant asset is sold for less than book value

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Accelerated depreciation

Any method of depreciation which records greater depreciation expense in the early years and less depreciation expense in the later years

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Declining-balance method of depreciation

A type of accelerated depreciation that multiplies the book value of an asset by a constant depreciation rate to determine annual depreciation.

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Double-declining balance method of depreciation

A declining-balance rate that is two times the straight-line rate.

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Intangible Asset

An asset that does not have physical substance.

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Amortization

The spreading of the cost of an intangible asset over its useful life.

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Payroll

list of a business's employees and the payment due to each employee for a specific pay period

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Pay period

amount of time for which an employee is paid

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Payroll clerk

a person who is responsible for preparing the payroll

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Gross earnings

total amount of money earned by an employee in a pay period

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Salary

fixed amount of money paid to an employee for each pay period

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wage

amount of money paid to an employee at a specified rate per hour worked

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time card

record of the time an employee arrives at work each time, the time the employee leaves, and the total number of hours worked each day

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electronic badge readers

computer technology where each employee's time card has a magnetic strip on which is encoded certain employee information

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piece rate

amount paid for each piece produced in a factory or manufacturing plant

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commission

amount paid to an employee based on a percentage of the employee's salary

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overtime rate

set by the Fair Labor Standards Act, is 1 and 1/2 times the employee's regular rate

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deduction

the amount that is subtracted from gross earnings

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exemption

an allowance claimed by a tax-person that reduces the amount of taxes that must be paid

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payroll register

form that summarizes information about an employees' earnings for each pay period

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net pay

amount of money left after all deductions are subtracted from gross earnings

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direct deposit

the employee's net pay is deposited in her or his personal bank account

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employee's earning record

where the individual payroll record for each employee is recorded

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accumulated earnings

each employee's year to date gross earnings

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unemployment taxes

based on a percentage of their employees' gross earnings and are collected to provide funds for workers who are temporarily out of work

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federal tax deposit coupon

(Form 8109) prepared and sent with the check to show the amount of taxes being sent to the federal government

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form 941

the employer's quarterly federal tax return

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form w-2

summarizes an employee's earnings and tax deductions for the previous calendar year

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form w-3

summarizes the information contained on the employee's form w-2

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form 940

an employer's annual unemployment tax return

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internal controls

those steps the business takes to protect cash and other assets

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external controls

those controls provided outside the business (ex. verifying the accuracy of a signature)

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checking account

a bank account that allows a bank customer to deposit cash and to write checks against the account balance

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check

a written order from a depositor telling the bank to pay a stated amount of cash to the person or business named on the check

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depositor

person or business that has cash on deposit in a bank

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signature card

contains the signatures of the persons authorized to write checks on the bank account

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deposit slip

a bank form on which the currency and checks to be deposited are listed (deposit ticket)

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endorsement

authorized signature that is written or stamped on the back of a check

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restrictive endorsement

restricts or limits how a check may be handled

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drawer

the person who signs a check

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drawee

bank on which the check is written

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voiding a check

writing the words void in large letters across the top of a check

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bank statement

itemized record of all the transactions occurring in a depositor's account over a given period, usually a month

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canceled check

returned checks that are stamped and marked with the word paid and the date of the payment

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reconciling the bank statement

the process of determining any differences between the balances shown on the bank statement and the checkbook balances

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outstanding checks

checks that have been written but not deposited

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outstanding deposits

deposits that have been made and recorded in the checkbook but do not appear on the bank statement

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bank service charge

fee charged by the bank for maintaining bank records and for processing bank statement items for the depositor

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stop payment order

demand by the depositor that the bank not honor a certain check

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NSF check

one returned by the bank because there are not sufficient funds in the drawer's checking account to cover the amount of the check

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electronic funds transfer system

enables banks to transfer funds from the account of one depositor to the account of another quickly and accurately without the immediate exchange of checks

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merchandising business

buys goods such as books, clothing or furniture and then sells those goods for profit

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retailer

business that sells to the final user

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wholesaler

business that sells to the retailer

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merchandise

the goods bought for resale to customers

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inventory

the items of merchandise the business has in stock

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sale on account

the sale of goods that will be paid for later

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charge customer

the customer to whom a sale on account is made

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credit cards

entitles a charge customer to charge merchandise

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sales slip

form that lists the details of a sale: the date, the name of the customer, and the description, quantity, price

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sales tax

tax on the retail sale of goods and service

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credit terms

set out the time allowed for payment (total amount of sale/amount of time)

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special journals

multi-column journals that have columns reserved for the recording of specific types of transactions

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sales journal

special journal used to record only the sale of merchandise on account

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accounts receivable subsidiary ledger

separate ledger that contains accounts for all charge customers

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subsidiary ledger

ledger, or book, that is summarized in a controlling account in the general ledger

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controlling account

balance must equal the total of all the account balances in the subsidiary ledger

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footing

column total written in small pencil figures

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adjusting entries

Journal entries recorded to update general ledger accounts at the end of a fiscal period.

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permanent accounts

accounts used to accumulate information from one fiscal period to the next.

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temporary accounts

Accounts used to accumulate information until it is transferred to the owner's capital account.

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closing entries

journal entries used to prepare temporary accounts for a new fiscal period.

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post-closing trial balance

A trial balance prepared after the closing entries are posted

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accounting cycle

The serious of accounting activities included in recording financial information for a fiscal period

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stakeholders

individuals or groups who have an interest in and are affected by the actions of an organization

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component percentage

The percentage relationship between one financial statement item and the total that includes that item.

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fiscal period

The length of time for which a business summarizes and reports financial information.

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work sheet

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements

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trial balance

A proof of the equality of debits and credits in a general ledger.

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adjustments

Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period.

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balance sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

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income statement

A financial statement showing the revenue and expenses for a fiscal period.

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net income

The difference between total revenue and total expenses when total revenue is greater

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net loss

The difference between total revenue and total expenses when total expenses are greater.

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code of conduct

A statement that guides the ethical behavior of a company and its employees.

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checking account

A bank account from which payments can be ordered by a depositor

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endorsement

A signature or stamp on the back of a check transferring ownership

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blank endorsement

An endorsement consisting only of the endorser's signature.

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special endorsement

An endorsement indicating a new owner of a check.

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restrictive endorsement

An endorsement restricting further transfer of a check's ownership.

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postdated check

A check with a future date on it.

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bank statement

A report of deposits, withdrawals, and bank balance sent to a depositor by a bank

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dishonored check

A check that a bank refuses to pay.

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electronic funds transfer

A computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents.

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debit card

A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder.

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petty cash

An amount of cash kept on hand and used for making small payments

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petty cash slip

A form showing proof of a petty cash payment.

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ledger

a group of accounts

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general ledger

A ledger that contains all accounts needed to prepare financial statements

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account number

The number assigned to an account.

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file maintenance

The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current.

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opening an account

Writing an account title and number on the heading of an account.

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posting

Transferring information from a journal entry to a ledger account.

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journal

A form for recording transactions in chronological order

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journalizing

Recording transactions in a journal.

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special amount column

A journal amount column headed with an account title

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general amount column

A journal amount column that is not headed with an account title.

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entry

Information for each transaction recorded in a journal

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double-entry accounting

The recording of debit and credit parts of a transaction

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source document

A business paper from which information is obtained for a journal entry

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check

a business form ordering a bank to pay cash from a bank account

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invoice

A form describing the goods or services sold, the quantity, and the price

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sales invoice

An invoice used as a source document for recording a sale on account

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receipt

A business form giving written acknowledgement for cash received

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memorandum

A form on which a brief message is written describing a transaction

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proving cash

Determining that the amount of cash agrees with the accounting records.

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T account

An accounting device used to analyze transactions

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debit

An amount recorded on the left side of a T Account

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credit

An amount recorded on the right side of a T account

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normal balance

The side of the account that is increased.

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chart of accounts (COA)

A list of accounts used by a business

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accounting

Planning, recording, analyzing, and interpreting financial information.

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accounting system

A planned process for providing financial information that will be useful to management.

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accounting records

Organized summaries of a business's financial activities.

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service business

A business that performs an activity for a fee.

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proprietorship

A business owned by one person.

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financial statements

Financial reports that summarize the financial condition and operations of a business.

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asset

anything of value that is owned

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equities

Financial rights to the assets of a business.

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liability

an amount owed by a business

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owner's equity

The amount remaining after the value of all liabilities is subtracted from the value of all assets.

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accounting equation

An equation showing the relationship among assets, liabilities, and owner's equity, Assets = Liabilities + Owner's Equity

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ethics

the principles of right and wrong that guide an individual in making decisions

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business ethics

the use of ethics in making business decisions.

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transaction

A business activity that changes assets, liabilities, or owner's equity.

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account

A record summarizing all the information pertaining to a single item in the accounting equation

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account title

The name given to an account.

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account balance

The amount in an account

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capital

the account used to summarize the owner's equity in a business

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revenue

an increase in owner's equity resulting from the operation of a business

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sale on account

A sale for which cash will be received at a later date

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expense

a decrease in owner's equity resulting from the operation of a business Expense a decrease in owner's equity resulting from the operation of a business

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withdrawals

Assets taken out of a business for the owner's personal use.

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assets

economic resources owned by a company that are expected to benefit future business periods.

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account

balance sheet with assets on the left and owners equity and liabilities on the right is what form

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FIFO

during inflation _____ gives the highest net income (lowest cost of goods sold and highest merchandise available for sale)

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LIFO

income statement approach

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going concern

business will continue on to carry commitments and obligations

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business entity

personal accounts of owner are separate from business

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historical costs

original cost of plant asset

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debit balance

what type of balance on the trial balance does merchandise inventory have at the beginning of a fiscal period on worksheet

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supplies in the debit column of the trial balance column of the worksheet

amount of supplies available during the period

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withholdings

wage payroll period marital status and allowances

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info for employee's FICA

wage year to date earnings FICA rates

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estimate of useful life is based on

prior experience

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realization of revenue

revenue earned

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total employee deductions

fica tax income tax

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reversing accrued interest expense

interest expense gets credited

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employee social security

total earnings accumulated earnings social security tax rate and social security tax base

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objective evidence

accounting entries based on facts

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conservatism

accounting for a business is fair and reasonable

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time period

use fiscal periods for accounting

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cost principle

purchases recorded at cost

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consistency

use same methods period to period and using the same accounting procedure between periods

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full disclosure

report full information that gives full report

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materiality

use GAAP principles when accounting

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The form that accompanies the payment of taxes to the federal government is a

940 form

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The form that contains information necessary to determine the employee's net earnings is a W-3 The form that contains information necessary to determine the employee's net earnings is a

W-3

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The form that summarizes the information reported on each employee's report of income and taxes is a/an __________.

W-4

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The form used by the employer to report his/her annual unemployment tax is a

W-2

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The purchase of a delivery van for cash would __________

increase the total debits of the trial balance

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revenue and decrease capital

Performing carpet cleaning services on account would increase

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The collection of cash from a charge customer would

increase net income and capital

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When reconciling the bank statement, an NSF check for $480 is included. The entry to record this reconciling item would include a __________.

credit cash

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FICA tax

employer and employee both pay

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on each journal page

the year and month are written

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a business has ___ types of entities

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use blank endorsement

if sending check through email

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even if a general account has a balance of zero, it is

written on a trial balance

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Medicare ___ funded under social security law

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lost check with blank endorsement can be cashed by

anyone who has the check

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addition error

if trial balance doesn't equal by 1

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transposition slide error

transposition slide error if trial balance doesn't equal and the difference is divisible by 9 there was probably a

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Jan 31 of the next year

Employers are required to furnish each employee an annual statement of earnings and withholdings before

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balance is written in the item column

when opening a new page in the accounts receivable ledger

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debit memo

shows the price deduction taken by a customer for a return and allowance

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debit side

what is the normal balance for the dividends account

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federal income tax is withheld in all but two states(t/f)

false

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special endorsement

when it's written "pay to the order of" and the new check owner's name

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adjusting entry usually reversed if its these accounts

asset or liability

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general ledger account

the amount of capital stock at the beginning of the year

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the month following each calendar quarter

employers must pay unemployment taxes

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petty cash is a

other revenue or expense

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balance sheet

which statement show financial strength

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capital is equal to what after closing entries

number on the balance sheet

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interest expense credit

reversing entry for accrued interest expense

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reversing entry for accrued interest income

income from interest gets debited and interest recieveable gets credited

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interest earned but not received

realization of revenue

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if cash short and over has a debit balance it is

other expense

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amount available during the fiscal period

supplies in debit column of trial balance

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beginning balance

merchandise inventory in the debit column of the trial balance

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where do you get info for closing entries?

income statement and balance sheet section of the worksheet

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stockholders equity

total investment to all owners

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receipt

source document for recording cash received from signing a note payable

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when is periodic inventory taken?

end of a fiscal period

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quarterly

each employer must file a federal tax return showing the federal income tax and social security and medicare taxes due to the government

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entry to establish petty cash

Petty cash debit and cash credit

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income summary

not on any financial statements

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land not depreciated

government prohibits it

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FOB shipping point

paid by supplier

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invoice

source doc for buying on account

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