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Account

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The record of the changes that have occurred in a particular asset, liability, or stockholders' equity during a period. The basic summary device of accounting.

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Accrued liability

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A liability for an expense that had not yet been paid by the company

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Credit

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The right side of an account

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Debit

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The left side of an account

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Journal

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The chronological accounting record of an entity's transactions.

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Ledger

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The book of accounts and their balances

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Prepaid expense

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Category of miscellaneous assets that typically expire of get used up in the near future. Examples include prepaid rent, prepaid insurance, and supplies

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Transaction

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Any even that has a financial impact on the business and can be measured reliably

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Trial balance

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A list of all the ledger accounts with their trial balances

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Accrual

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An expense or a revenue that occurs before the business pays or receives cash. An accrual is the opposite of a deferral.

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Accrual accounting

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Account that records the impact of a business event as it occurs, regardless of whether the transaction affected cash.

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Accrued Expense

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An expense incurred but not yet paid in cash

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Accrued revenue

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A revenue that has been earned but not yet received in cash

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Accumulated depreciation

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The cumulative sum of all depreciation expense from the date of aquiring a plant asset

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Adjusted Trial Balance

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A list of all the ledger accounts with their adjusted balances

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Book value (of a plant asset)

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The assets cost minus accumulated depreciation

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Cash-Basis accounting

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Accounting that records only transactions in which cash is received or paid.

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Classified Balance sheet

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A balance sheet that shows current assets separate from long term assets, and current liabilities separate from long term liabilities

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Closing the Books

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The process of preparing the accounts to being recording the next period's transactions. Closing the accounts consists of journalizing and posting the closing entries to set the balances of the revenue, expense, and dividends accounts to zero. Also called closing the accounts.

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Closing entries

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Entries that transfer the revenue, expense, and dividends balanced from these respective accounts to the retained earnings account.

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Current assets

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an asset that is expected to be converted to cash, sold, or consumed during the next 12 months or within the business's normal operating cycle is longer than a year.

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Current liabilities

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A debt due to be paid within one year or within the entity's operating cycle if the cycle is longer than a year.

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Current ration

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Current assets divided by current liabilities. Measures a company's ability to pay current liabilities with current assets.

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Debt Ratio

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Ratio of total liabilities to total assets. States the proportion of a company's assets that is financed with debt.

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Deferral

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An adjustment for which the business is paid or received cash in advance. Examples include prepaid rent, prepaid insurance, and supplies.

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Depreciation

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The cost of a plant asset over its useful life

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Liquidity

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Measure of how quickly an item can be converted to cash

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Long term assets

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An asset that is not a current asset

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Long term liabilities

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A liability that is not a current liability

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Multi step income statement

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An income statement that contains subtotals to highlight important relationships between revenues and expenses

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Operating cycle

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Time span during which cash is paid for goods and services that are sold to customers who pay the business in cash

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Permanent accounts

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Asset, liability, and stockholders' equity accounts that are not closed at the end of the period

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Plant Assets

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Long lives assets, such as land, buildings, and equipment, used in the operation of the business. Also called fixed assets.

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Prepaid expense

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A category of miscellaneous assets that typically expire or get used up in the near future. Examples include prepaid rent, prepaid insurance, and supplies.

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Report format

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a balance sheet format that lists assets at the top followed by liabilities and stockholders' equity below

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Revenue principle

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The basis for recording revenues. Tells accountants when to record revenue and the amount of revenue to record

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Single Step Income statement

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An income statement that lists all the revenues together under a heading such as revenues or revenues and gains. Expenses appear in a separate category called expenses or perhaps expenses and losses

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temporary accounts

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The revenue and expense accounts that relate to a limited period and are closed at the end of the period. For a corporation, the dividend account is also temporary

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Time Period concept

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Ensures that accounting information is reported at regular intervals

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Unearned revenue

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A Liability created when a business collects cash from customers in advance of earning the revenue. The obligation is to provide a product or service in the future.

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accounts payable

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A Liability backed by the general reputation and credit standing of the debtor

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accounting

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The information system that measures business activities, processes that information into reports and financial statements, and communicates the results to decision makers

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Accounting equation

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Assets=Liabilities+Equity

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Assets

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An economic resource that is expected to be of benefit in the future.

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Balance sheet

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Lift of an entity's assets, liabilities, and owner's equity as of a specific date.

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Capital

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Another name for the owner' equity of a business

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Cash

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Money and any medium of exchange that a bank accepts at face value.

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Current assets

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an asset that is expected to be converted to cash, sold, or consumed during the next 12 months, or withing the business's normal operating cycle if longer than 1 year

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Current Liabilities

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A Debt due to be paid within 1 year of within the entity's operating cycle if the cycle is longer than a year

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Dividends

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Distributions (usually cash) by a corporation to its stockholders

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Entity

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An organization or a section of an organization that, for accounting purposes, stands apart from other organizations and individual

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Expenses

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Decrease in retained earnings that results from operations; the cost of doing business; opposite of revenues

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Financial accounting

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The branch of accounting that provides information to people outside the firm

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Financial statements

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Business documents that report financial information about a business entity to decision makers

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Generally Accepted Accounting Principles (GAAP)

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Accounting guidelines, formulated by the financial accounting standards board, that govern how accounting is practiced

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Going-concern concept

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Holds that the entity will remain in operation for the foreseeable future

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Income statement

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A financial statement listing an entity's revenues, expenses, and net income or net loss for a specific period. Also called the statement of operations.

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Liabilities

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An economic obligation (a debt) payable to an individual or an organization outside the business

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Net Earnings

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Another name for net income

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Net income

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Excess of total revenues over total expenses. Also called net earnings or net profit.

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Net Loss

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Excess of total expenses over total revenues

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Note payable

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A Liability evidenced by a written promise to make a future payment

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Owner's Equity

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The claim of the owners of a business to the assets of the business. Also called capital, stockholders' equity, or net assets

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Paid-In-Capital

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The amount of stockholder's equity that stockholders have contributed to the corporation. Also called contributed capital

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Plant Assets

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Another name for property, plant and equipment

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Reliability principle

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The accounting principle that ensures that accounting records and statements are based on the most reliable data available. Also called the objectivity principle

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Retained earnings

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The amount of stockholders equity that the corporation has earned through profitable operation and has not given back to stockholders.

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Revenues

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Increase in retained earnings from delivering goods or services to customers or clients.

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Statement of cash flows

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Reports cash receipts and cash payments classified according to the entity's major activities: operating, investing and financing.

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Statement of financial position

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Another name for the balance sheet

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Statement of retained earnings

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Summary of the changes in the retained earnings of a corporation during a specific period

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Stocholders' equity

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The stockholders ownership interest in the assets of a corporation

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