Term
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Definition
| The process of collecting, recording,summarizing and using financial data |
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Term
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Definition
| area of accounting that deals with VERIFYING the records that are kept and any COMPUTATIONS that are made |
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Term
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Definition
| Documents the flow of resources into and out of the business as well as the claims of creditors and owners to those resources |
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Term
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Definition
| the fiscal events that are recorded |
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Term
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Definition
| Transactions are recorded at the time they occur |
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Term
| Cash method of accounting |
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Definition
| Transactions are recorded when cash transfers hands |
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Term
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Definition
| The measurement of goods/services sold for which the business receives cash or the promise of cash |
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Term
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Definition
| Measurement of resources used up during a period of time in order to earn revenue |
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Term
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Definition
| Assets, Owner's Equity, Liability |
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Term
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Definition
| Resources owned by the business |
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Term
| Examples of Asset accounts |
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Definition
| Cash, Prepaid Insurance, Accts receivable, building, inventory, equipment |
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Term
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Definition
| Debts owned by the business to the creditors |
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Term
| Examples of Liability accts |
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Definition
| Notes payable, accounts payable |
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Term
Owner's Equity
(definition and AKA) |
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Definition
| The claim of the owners to the assets of the business after the creditors have been paid. AKA "net worth" |
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Term
| OE is increased when_______and______ and is decreased when ______. |
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Definition
| owners make investments...revenue is earned...bills are paid |
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Term
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Definition
| Contributed capital, sales & service revenue, Expense accounts |
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Term
| Fundamental Accounting Equation |
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Definition
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Term
| Does the Purchase of an Asset Increase Owner's Equity? |
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Definition
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Term
| Does Decreasing Liability INcrease Owner's Equity? |
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Definition
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Term
| Why isn't an expense a liabilty? |
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Definition
| Expenses are resources used up. THey require immediate payment of cash for the amount in full. |
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Term
| What three things should you ask yourself when recording transactions? |
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Definition
1. What accts are affected?
2. How is the heading affected?
3. Do debits = credits? |
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Term
| 4 Steps for recording Transactions |
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Definition
1. Mental analysis
2. Journalizing
3. Posting
4. Trial Balance |
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Term
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Definition
| Expenses recorded on the last day of the accting period |
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Term
| Typical Examples of Adjusting Entries |
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Definition
| Inventory, Salary, Prepaid Expenses, Depreciation |
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Term
| Cost of Goods Sold is recorded on the __________ side of the Assets account and the _________ side of the OE |
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Definition
| credit side of assets, debit side of OE |
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Term
| Fixed Assets v. Current Assets |
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Definition
| Fixed Assets are long-lived resources while Current assets are short-lived and will turn into cash w/in one year |
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Term
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Definition
| Show depreciation of fixed assets directly below the fixed asset to which they pertain. |
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Term
| Two Types of Financial Statements |
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Definition
| Income statement and balance sheet |
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Term
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Definition
| Summary of income earned during an accting period. Use revenue and expense account balances to construct |
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Term
| 6 Sections of an Income Statement |
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Definition
1. Heading
2. Revenue
3. Costs of Goods Sold
4. Gross Margin (rev - cogs)
5. Expenses
6. Net Profit (AKA Income) (rev-all expenses or gm - other expenses) |
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Term
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Definition
Net Income = Net Profit - Income Tax
**Sole Proprietorships don't pay tax therefore net profit = net income |
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Term
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Definition
| Made after income statement made. Empty out Expense and Revenue accounts. Transfer income to retained earnings. |
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Term
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Definition
| Presents the financial position of a business at any point in time |
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Term
| 5 sections on a balance sheet |
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Definition
1. Heading
2. Assets
3. Liabilities
4. Owner's Equity
5. Liabilities + OE |
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Term
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Definition
| Link b/t income statement and balance sheet |
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Term
| 5 Steps in the Accounting Cycle |
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Definition
1. Record Transactions (throughout period)
Last Day of Period:
2. Adjusting Entries
3. Income Statement
4. Closing Entries
5. Balance Sheet |
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