Accounting Final Exam Study Guide

Accounting
planning, recording, analyzing, and interpreting financial information

Withdrawals
assets taken out of a business for the owner’s personal use

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

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

Accounting Equation
An equation showing the relationship among assets, liabilities, and owner’s equity

Captial
The account used to summarize the owner’s equity in a business.

Accounting System
a planned process for providing financial information that will be useful to management

Asset
anything of value that is owned

Liability
an amount owed by a business

Owner’s Equity
the amount remaining after the value of all liabilities is subtracted from the value of all assets

Revenue
an increase 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

Transaction
a business activity that changes assets, liabilities, or owner’s equity

T-account
An accounting device used to analyze transactions

Debit
An amount recorded on the left side

Credit
an amount recorded on the right side

Normal Balance
The side of the account that is increased

Double-Entry Accounting
The recording of debit and credit parts of a transaction

Journal
A form for recording transactions in chronological order

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

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

Ledger
a group of accounts

Posting
transferring information from a journal entry to a ledger account

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

Petty Cash
an amount of cash kept on hand and used for making small payments.

Electronic Funds Transfer
a computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents

Postdated Check
a check with a future date on it

Code of Conduct
a statement that guides the ethical behavior of a company and its employees

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

Balance Sheet
a financial statement that reports assets, liabilities, and owner’s equity on a specific date

Income Statement
a financial statement showing the revenue and expenses for a fiscal period

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

Net Loss
The difference between total revenue and total expenses when total expenses are greater

Fiscal Period
the length of time for which a business summarizes and reports financial information

Permanent Accounts
accounts used to accumulate information from one fiscal period to the next

Temporary Accounts
accounts used to accumulate information until it is transferred to the owner’s capital account

Closing Entries
Journal entries used to prepare temporary accounts for a new fiscal period

Accounting Cycle
The series of accounting activities included in recording financial information for a fiscal period

Post-closing Trial Balance
A trial balance prepared after the closing entries are posted

Capital Stock
Total shares of ownership in a corporation

Special Journal
a journal used to record only one kind of transaction

Vendor
a business from which merchandise is purchased or supplies or other assets are bought

Terms of Sale
an agreement between a buyer and a seller about payment for merchandise

Contra Account
an account that reduces a related account on a financial statement

Customer
a person or business to whom merchandise or services are sold

Sales Discount
A cash discount on sales taken by a customer

Cash Sale
A sale in which cash is received for the total amount of the sale at the time of the transaction

Credit Card Sale
A sale in which a credit card is used for the total amount of the sale at the time of the transaction.

Subsidiary Ledger
a ledger that is summarized in a single general ledger account

Accounts Payable Ledger
A subsidiary ledger containing only accounts for vendors from whom items are purchased or bought on account.

Accounts Receivable Ledger
A subsidiary ledger containing only accounts for charge customers

Controlling Account
an account in a general ledger that summarizes all accounts in a subsidiary ledger

Salary
the money paid for employee services

Pay Period
The period covered by a salary payment

Payroll
The total amount earned by all employees for a pay period

Total Earnings
the total pay due for a pay period before deductions

Payroll Taxes
Taxes based on the payroll of a business

Withholding Allowance
a deduction from total earnings for each person legally supported by a taxpayer, including the employee.

Net Pay
the total earnings paid to an employee after payroll taxes and other deductions

Social Security Tax
a federal tax paid for old-age, survivors, and disability insurance

Medicare Tax
a federal tax paid for hospital insurance

Federal Unemployment Tax
A federal tax used for state and federal administrative expenses of the unemployment program

State Unemployment Tax
A state tax used to pay benefits to unemployed workers

Retained Earnings
an amount earned by a corporation and not yet distributed to stockholders

Dividends
Earnings distributed to stockholders

Uncollectible Accounts
accounts receivable that cannot be collected

Current Assets
cash and other assets expected to be exchanged for cash or consumed within a year

Plant Assets
Assets that will be used for a number of years in the operation of a business

Depreciation Expense
the portion of a plant asset’s cost that is transferred to an expense account in each fiscal period during a plant asset’s useful life

Accumulated Depreciation
the total amount of depreciation expense that has been recorded since the purchase of a plant asset

Net Sales
Total sales less sales discount and sales returns and allowances

Cost of Merchandise Sold
the original price of all merchandise sold during a fiscal period

Gross Profit on Sales
the revenue remaining after cost of merchandise sold has been deducted

Current Liabilities
liabilities due within a short time, usually within a year

Long-Term Liabilities
liabilities owed for more than a year

Sold Services On Account
Debit: accounts receivable
Credit: sales

Bought Supplies On Account
Debit: supplies
Credit cash

Replenish Petty Cash Fund
Debit: Any Expense or Asset
Credit: Cash

Record Cash and Credit Card Sales
Debit: cash
Credit: sale and sales tax payable

Received Cash On Account
Debit: cash
Credit: accounts receivable

Record Employer Payroll Taxes Expense
Debit: Payroll Tax Expense
Credit: Medicare Tax Payable
Credit: Social Security Tax Payable
Credit: Unemployment Tax Payable-State
Credit: Unemployment Tax Payable-Federal

Pay Federal Unemployment Taxes
Debit: Unemployment Tax Payable- Federal
Credit: Cash

Record Office Supplies Adjustment (Balance is $2,100 and Inventory is $900)
Debit: Supplies Expense-Office
Credit: Supplies- Office

Record Federal Income Tax Expense Adjustments
Debit: Federal Income Tax Expense
Credit: Federal Income Tax Payable

Pay a Payroll (deductions for employee income tax, Social Security and Medicare Tax, and U.S. Saving Bonds)
Debit: Salary Expense
Credit: Employee Income Tax Payable
Credit: Social Security Tax Payable
Credit: Medicare Tax Payable
Credit: U.S. Saving Bonds
Credit: Federal Income Tax Payable