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Accounting

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The process of identifying, measuring, and communicating economic information to permit informed judgement and decisions by users of the information.

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Financial accounting (branch of accounting)

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accounting for revenues, expenses, assets, and liabilities.

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Cost accounting (branch of accounting)

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accounting dealing with the recording, classification, allocation, and reporting of current and prospective costs.

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Managerial accounting (branch of accounting)

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accounting designed to provide information to various management levels in the hospitality operation for the purpose of enhancing controls.

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Tax accounting (branch of accounting)

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accounting relating to the preparation and filing of tax forms with government agencies.

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Auditing (branch of accounting)

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accounting involved in reviewing and evaluating documents, records, and control systems

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Accounting systems (branch of accounting)

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accounting that covers the review of a firm's entire information system, not just the accounting system

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Cost (principle of accounting)

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An accounting principle that requires recording the value of transactions for accounting purposes at the actual transaction price (cost)

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Business entity (principle of accounting)

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principle that requires that a business maintain its own set of records and accounts that are separate from other financial interests (business separate from personal life)

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Continuity of the Business Unit (principle of accounting)

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Assumption in preparing the accounting records and reports that the business will continue indefinitely and that liquidation is not a prospect (business is a going concern)

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Unit of Measure (principle of accounting)

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principle that requires financial data to be recorded with a common unit of measure. (in U.S it's the dollar)

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Objective evidence (principle of accounting)

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principle that states that all accounting transactions and the resulting accounting records should be based on objectively determined evidence to the greatest extent possible

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Full disclosure (principle of accounting)

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principle stating that a business's financial statements should provide information on all the significant facts that have s bearing on their interpretation. Example: disclosures include the accounting methods used, changes in the accounting methods, contingent liabilities, events occurring subsequent to the financial statement date, and unusual and nonrecurring items (footnotes)

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Consistency (principle of accounting)

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principle that requires that once an accounting method has been adopted, it should be followed from period to period in the future unless a change in accounting methods is warranted and disclosed

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Matching (principle of accounting)

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principle that requires that expenses and revenues be matched to the period in which they were incurred or earned regardless of when they are actually realized (revenue is recorded where its earned)

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Conservatism (principle of accounting)

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principle that requires accounting procedures that recognize expenses as soon as possible, but delay the recognition of revenues until they are ensured. Example: nonrefundable deposits for future services should be recognized as liabilities until the service is actually performed.

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Materiality (principle of accounting)

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Events or info must be accounted for if they "make a difference" to the user of the financial information.

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Revenue recognition (principle of accounting)

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Determines when revenues are recognized as well as the amount to be recorded

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Asset Accounts

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Cash, Notes Receivable, Accounts Receivable, Accrued Interest Receivable, Marketable Securities, Prepaid Expenses, Property & Equipment, Merchandise

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Debit

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Left side of any account

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Credit

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Right side of any account

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Normal Balance of Asset

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Debit

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General Ledger

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Group of general accounts that includes accounts for assets, liabilities, owner's equity, revenues, expenses, and owner's drawings

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Cash basis accounting

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Recognizes an accounting transaction at the point of cash inflow or outflow

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Accrual basis accounting

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Recognizes expenses when they are incurred regardless of when payment is made, and recognizes Revenue when it is earned regardless of when cash is received

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Contents of a balance sheet

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assets(things owned), liabilities(things you owe), and owner's equity (owner's investments)

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General ledger

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at end of the month a trial balance of general ledger accounts is prepared to prove equality of debits and credits

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sole proprietorship

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a form of business that is owned and operated by one person (with a few employees), most common type of business and easiest to make

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Partnership

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a form of business ownership where two or more individuals work together with the intention of making a profit

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Limited Partnership

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A business organization with two classes of owners. The limited partner invests in the business, but may not exercise control over its operation, in return for protection from liability. The general or managing partner assumes full control of the business operation, but can also be held liable for any debts the operation incurs.

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Limited Liability Companies (LLC)

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A type of business organization that protects the owners from liability for debts incurred by the business, without the need for some of the formal incorporation requirements. The federal government does not tax the profits of LLC's; however, some states do while others do not.

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Corporations

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The most common form of organizing a business — the organization's total worth is divided into shares of stock, and each share represents a unit of ownership and is sold to stock holders. A corporation is considered a separate entity from the stockholders for legal and tax purposes.

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Assets

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Resources owned by a business

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Liabilities

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Things the business OWES

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Owners' Equity

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Owners' Investment in the business

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Revenue

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Cash inflows from sales of goods or services

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Expense

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Cash outflows to run the business

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Asset Accounts def

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Debit-INCREASE Credit-DECREASE

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Owners' Equity Accounts

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Debit-DECREASE Credit-INCREASE

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Revenue Accounts

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Debit-DECREASE Credit-INCREASE

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Expense Accounts

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Debit-INCREASE Credit-DECREASE

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Account Balances

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the difference between the total debits and the total credits in an account

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Adjusting Entry

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Entry made at the end of at the end of the period to assign revenues to the period in which they were earned and expense to the period in which they were incurred. Adjusting entries help measure the period's income and bring the related asset and liability accounts to correct balances for the financial statement.

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Deferral

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When cash comes before the action. A deferral means that the company will postpone recognition of an expense until an item such as insurance is actually used

HFT2401 Hospitality Industry Financial Accounting Chapter 1,2,3 – Flashcards

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