Principles of accounting – Flashcards
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Account
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The detailed record of all the changes that have occurred in a particular asset, liability, or owner's equity (stockholders' equity) during a period. The basic summary decive of accounting
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Accrued Liability
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A liability for which the business knows the amount owed but the bill has not been paid.
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Chart of Accounts
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A list of all a company's accounts with their account numbers.
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Compound Journal Entry
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Same as a journal entry, except this entry is characterized by having multiple debits and/or multiple credits. The total debits still equal the total credits in the compound journal.
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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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Double-Entry System
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A system of accounting where every transaction affects at least two accounts.
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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 record holding all the accounts and amounts.
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Normal Balance
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The balance that appears on the side of an account-debit or credit-wheere we record increases.
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Note Receivable
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A written promise for future collection of cash
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Notes Payable
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Represents debts the business owes because it signed promissory notes to borrow money or to purchase something.
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Posting
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Copying amounts from the journal to the ledger.
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Prepaid Expenses
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Expenses paid in advance of their use.
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T-account
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Summary device that is shaped like a capital "T" with debits posted on the left side of the vertical line and credits on the right side of the vertical line. A "shorthand" version of a ledger.
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Trial Balance
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A list of all the ledger accounts with their balances at a point in time.
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Accrual
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The cash payment occurs after an expense is recorded or the cash is received after the revenue is earned.
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Accrual-Basis Accounting
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Accounting that records revenues when earned and expenses when incurred.
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Accrued Expense
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An expense that the business has incurred but not yet paid.
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Accrued Revenue
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A revenue that has been earned but for which the cash has not been collected yet.
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Accounulated Depreciation
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The sum of all depreciation expense recorded to date for an asset.
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Adjusted Trial Balance
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A list of all the accounts with their adjusted balances.
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Adjusting Entries
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Entries made at the end of the period to assign revenues to the period in which they are earned and expenses to the period in which they are incurred. Adjusting entries help measure the period's income and bring the related asset and liability accounts to correct balances for the financial statements.
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Book Value (of a plant asset)
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The asset's cost minus accumulated depreciation.
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Cash-Basis Accounting
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Accounting that records transactions only when cash is received or paid.
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Contra Account
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An account that always has a companion account and whose normal balance is opposite that of the companion account.
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Deferral
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The cash payment occurs before an expense is recorded or the cash is received before the revenue is earned. Also called a prepaid.
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Deferred Revenue
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A liability created when a business collects cash from customers in advance of doing work. Also called unearned revenue.
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Depreciation
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The allocation of a plant asset's cost over its useful life.
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Liquidation
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The process of going out of business by selling all the assets, paying all the liabilities, and giving any leftover cash to the owner(s).
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Matching Principle
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Guide to accounting for expenses. Identify all expenses incurred during the period, measure the expenses, and match them against the revenues earned during that same time period.
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Plant Assets
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Long-lived tangible assets-such as land, buildings, and equipment-used in the operation of a business.
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Prepaid
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The cash payment occurs before an expense is recorded or the cash is received before the revenue is earned. Also called a deferral.
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Revenue Recognition 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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Time-Period Concept
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Ensures that information is reported at least annually.
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Unearned Revenue
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A liability created when a business collects cash from customers in advance of doing work. Also called deferred revenue.
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Accounting Cycle
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Process by which companies produce their financial statements for a specific period.
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Classified Balance Sheet
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A balance sheet that classifies each asset and each liability as either current or long-term.
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Closing the Accounts
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Step in the accounting cycle at the end of the period. Closing the accounts consists of journalizing and posting the closing entries to set the balances of the revenue, expense, and drawing accounts to zero for the next period.
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Closing Entries
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Entries that transfer the revenue, expense, and drawing balances to the Capital account.
