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54 Cards in this Set

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Adjusting Entries
1) Converting Assets to Expenses
2)Converting liabilities to Revenue
3) Accruing Unpaid Expenses
4) Accruing Uncollected Revenue
Converting Assets to Expenses
depreciation
prepaid expenses (assets)
Converting Liabilities to Revenue
Magazine Company has to pay back each month.
Assets =
Liabilities + Owner's Equity
Revenues - Expenses =
profit/loss
DEBIT
recievable
expenses
assets (cash, equipment)
CREDIT
payable
revenue
liabilities
owner's equity
O/E
Retained Earnings
Capital Stock
Retained Earnings
Net Income
Accrual Accounting
recognizing revenue when earned and expenses when goods or services are used
Realization Principle
REVENUES
when goods or services are rendered
Matching Principle
EXPENSES
when goods or services are rendered
Accounting
connects people who run a business to the results of that business
Accounting Process
Links decision makers w/ economic activities
Accounting Process Cycle
(Cycle)
Financial Accounting
Intended to serve the external parties' (of a company) needs.

-Balance Sheet
-Income Statment
-St'mt of Cash Flows

-Estimates and judgements
Sole Proprietorship
owner of business is also manager
Partnership
business w/ 2 or more people
Corporation
seperate entity
managers run business, stockholders own it
LLC
Limited Liability Corporation
- divides profits among partners
GAAP
Generally Accepted Accounting Principles
- govern preparation of financial Statements
Seperate Entity Concept
seperate set of accounts and financial statements for corporation itself
Cost Principle
objective and verifyable
Historical Cost
put down by current owner
Going Concern
assumption the the business is a continuing enterprise
Conservatism
Applying the accounting treatment that results in the lowest estimate of net income for the current period.
Business Entity
involved in identifiable business activities
seperate from personal
Balance sheet
1 point in time snapshot
A = L + O/E
specific date
Income Statement
Period of time between 2 balance sheets
Revenues & Expenses
Statement of Cash Flows
end of year report
Assets
have value today, and will in the future also
Current Assets
come first on balance sheet, then Accounts recievable
then permanent assets
Liability
obligation to make cash payment in future- debts
Captial Stock
money invested by owners
Retained earnings
accumulated profits/losses since company began
Accounts Payable
obligation to pay supplier
Notes Payable
Obligation to a finanical institution
Journal Entry
date
accounts
amounts
description of transaction
*Chronological order
-best source of info. for single transaction
Ledger
posts end of month
Posting
putting amounts from journal entries in T accounts
Depreciation
allocation of historical cost of permanent investment over its estimated life.
Contra Account
account w/ credit balance that is deducted from an asset account to produce proper balance sheet amount for the asset
Dividends
reduce owners equity

- +
Accounting Cycle
Journalize
Posting
Financial Statements
8-K
report that you have to give to SEC
(ex: Bill Gates has heart attack)
EDGAR
Electronic Data Gathering and Retrieval - lets public know whats going on
Things that INCREASE O/E
owner's investments
business earnings
Things that DECREASE O/E
payments to owners
business losses
Revenue
price for goods sold
INCREASES O/E
Expenses
Cost of goods and services used
DECREASES O/E
Adjusting Entries are needed when
revenues or expenses affect more than one accounting period
SEC
Securities and Exchange Commission
-created 1934 by congress
-controls trading of securities
- controls FASB
FASB
Financial Accounting Standards Board
private sector
- make GAAP
-have been told twice what to do by SEC
PCAOB
Public Company Accounting Oversight Board
- public accounting
- sets auditing standards of publicly traded companies