Chapter 3: Introduction to Accounting – Flashcards
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Accounts Payable Accounting
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Is associated with the procurement process. Companies use this to record and manage money owed to vendor for the purchase of material and services.
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Asset Accounting
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Is used to record data related to the purchase, use, and disposal of assets such as buildings, equipment, machinery, and automobiles.
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Bank Ledger Accounting
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Is concerned with recording data associated with bank transactions.
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Balance Sheet
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Is a snapshot of the organization at a point in time. It identifies assets, liabilities, and equity.
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Income Statement (Profit and Loss Statement)
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Indicates the changes in a company's financial position over a period of time.
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Statement of Cash Flow
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Displays all cash receipts and payments over a specified period of time.
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Business Areas
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These are internal divisions of an enterprise that are used to define areas of responsibility or to meet the external reporting requirements of an enterprise segment.
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Segment
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Is a division of an enterprise for which management monitors performance (revenue, costs, profitability, etc.) separately from other segments.
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Chart of Accounts
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It is a list of accounts that can be included in the general ledger. It is an ordered listing of accounts that comprise a company's general ledger.
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Operative COA Country COA Group COA
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What are the three types of Chart of Accounts?
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Operative COA
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Contains the operational accounts that are used to record the financial impact of an organization's day-to-day transactions. It is the primary COA maintained by an organization.
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Country-Specific COA
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Companies create alternative accounts to meet the special country-specific reporting requirements.
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Group COA
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This contains group accounts that multiple companies within an enterprise use to consolidate their financial reporting.
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Assets
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Items that a company owns, such as cash, inventory of materials, land, buildings, and money owed to the company by its customers (receivables).
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Liabilities
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Items that a company owes to others, including money owed to vendors (payables) and loans from financial institutions.
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Owners' Equity
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Refers to the owners' share of the company's assets.
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Revenue
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The monies the company earns by selling its products and services.
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Expenses
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The costs associated with creating and selling those products and services.
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Account Group
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Groups together accounts with similar characteristics.
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Subsidiary Ledgers or Subledgers
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Customer and Vendor accounts are maintained using these.
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Reconciliation Accounts
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These are general ledger accounts that consolidate data from a group of related sub ledger accounts, such as customers and vendors
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Accounts Receivable
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This is the reconciliation account for customers.
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Accounts Payable
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This is the reconciliation account for vendors.
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Financial Accounting Document (FI Document)
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Records the impact (financial data) of a transaction step on financial accounting.
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Posting Key
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It is a two-digit code that determines how a line item is posted using a debit or credit.
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Parallel Accounting
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An organization can implement multiple ledgers in parallel and use each ledger for different purposes.
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Leading Ledger
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Enterprise will implement on set of accounting principles. Global principles are consolidated in a single ledger. It is required, and all transaction data are posted to it.
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Non-leading Ledgers
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These are defined for each company (company code) based on the local accounting practices of each company located in a region.
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Cost Center
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It is associated with a location where costs are incurred. It is something that absorbs cost that are generated when companies execute processes.
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Cost Objects
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All the orders and cost centers are called ___________.
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Asset Class
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It is a grouping of assets that posses similar characteristics.
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Account Determination
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The reconciliation account for each asset in sub-ledger account is determined by its association with an asset class. This association is referred to ___________.
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Depreciation
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Over time, an asset's value diminishes due to wear and tear. This decrease in value is recorded as ____________.
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Asset Explorer
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Provides an overview of all the activities related to the asset, including acquisition data, planned and posted depreciation for different depreciation areas, and comparisons of data across multiple years.
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Financial Statement Version
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Is a hierarchical grouping of general ledger accounts that must be included in the financial statements
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