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47 Cards in this Set

  • Front
  • Back
what are the goals of financial management
solvency
efficiency
profitability
process of collecting, recording, summarizing, and using financial data is the definition of?
accounting
the special area of accounting that deals with verifying the records that are kept and any computations that are made is called
auditing
the process that documents the flow of resources and claims of creditors and owners to the resources is the definition of?
book keeping
the fiscal/financial events that are recorded is called
transactions
the period of time over which transactions are recorded at the end of which income is measured is called?
accounting period
how long is are most common accounting periods?
1 year
what are the methods of recording transactions
accrual
cash
transactions that are recorded at the time they occur is the definition of
accrual
transactions recorded when cash transfers hands is
cash
the use of the accrual system because it matches revenue earned to expenses incurred to generate revenue is the definition of what principle
matching principle
The measurement of goods sold or services rendered for which the business receives “cash” or “the promise of cash” (or something else of value) is the definition of
revenue
The measurement of resources used up during a period of time in order to earn revenue is the definition of
expenses
what are the different types of accounts
asset
liabilities
owner equity
Resources owned by the business is the definition of
assets
cash
accounts receivable
building
inventory
prepaid insurance
equipment
are examples of what type of accounts
assets
Debts owed by the business to creditors is the definition of
liabilities
liabilities arise under what 2 conditions
borrow cash (loans)
purchase goods on services on credit
notes payable and accounts payable are examples of what type of account
liability
The claim of the owners to the assets of the business, after the creditors have been paid (also called NET WORTH) is the definition of
owners equity
contributed capital, sales revenue, service revenue, and expense account are examples of what type of account
owner's equity
Every time a transaction occurs, it has to be recorded in the proper accounts is the definition of
dual effects of accounting
the measure of resources used up that requires the immediate payment of cash for the amount in full is the definition of?
expense
for asset accounts, where do increases or decreases in accounts fall (debit or credit)
increases = debit
decrease = credit
for liability and OE account, where do increases or decreases in accounts fall (debit or credit)
decreases = debit
increases = credit
what are the 4 steps for recording transactions
mental analysis
journalizing
posting
trial balance
what are the steps used for recording typical transactions
mental analysis
posting
making sure the T balance equals out is the definition of?
trial balance
this occurs when the last day of the accounting period has not been reached
unadjusted trial balance
What are the 4 typical adjusting entries
inventory
salary
depreciation
prepaid expenses
Tangible, long-lived resources used in the operation of the business (Bldg, Machinery, Fixtures, Equipment) are what type of assets
fixed
Resources owned by the business which are expected to be realized in cash, sold, or consumed in one year (Cash, Accounts Receivable, Inventory) are what type of assets
current
True or False: With the exception of land, fixed assets are depreciated over their useful life
True
equal wear/tear each year of useful life
is what type of depreciation
straight line
This type of account reside directly below the fixed asset account to which they pertain.
for depreciating fixed assets, it should be used for the credit entry so that the balance in the fixed asset account will retain its initial value
contra (offset) accounts
What are the six sections of an income statement
heading
revenue
cost of goods sold
gross margin
remaining expenses
net profit
revenue - cost of goods sold equal?
gross margin
revenue - all expenses equal?
net profit
gross margin - remaining expenses equal
net profit
which of the following do not pay income tax?
corporations
sole proprietorships
partnerships
sole proprietorships
partnerships
net profit - income tax equal
net income
this is made after income is measures. It empties out revenue and expense accounts and transfer income to retain earnings ( OE account)
closing entries
Theses are made to empty out revenue and expense accounts so that the business can begin measuring income for the new accounting period
closing entries
This presents the financial position of a business at a particular point in time.
balance sheet
To construct a balance sheet, what accounts are needed?
all assets
all liabilities
all OE accounts
What are the 5 sections of the balance sheet
heading
assets
liabilities
OE
liabilities + OE
retained earnings
match the following to the time during the accounting period (throughout vs. last day) in which it must be done:

record transactions
adjust entries
income statment
closing entries
balance sheet
record transactions = throughout accounting period
everything else = last day of accounting period