Accounting Chapter 3

Front 1

Accounting Information System

Back 1

Collects and processes transaction data and disseminates the financial info to interested parties.

Front 2

Event

Back 2

A happening of consequence. An event generally is the source or cause of changes in assets, liabilities and equity. May be internal or external.

Front 3

Transaction

Back 3

An external event involving the transfer or exchange btw 2 or more entities.

Front 4

Account

Back 4

A systematic arrangement that shows the effect of transactions and other events on a specific element.

Front 5

Real Accounts

Back 5

assets, liability and equity accounts
appear on balance sheet

Front 6

nominal accounts

Back 6

revenue, expense and dividend accounts
appear on income statement (except dividends)
periodically closed

Front 7

ledger

Back 7

the book containing the accounts

Front 8

general ledger

Back 8

collection of all the asset, liability, owners equity, revenue and expense accounts

Front 9

subsidiary ledger

Back 9

contains the details related to a given ledger account

Front 10

journal

Back 10

the book of original entry where teh company initially records transactions and other selected events

Front 11

posting

Back 11

the process of transferring the essential facts and figures from the book of original entry to the ledger acct.

Front 12

trial balance

Back 12

list of all open accounts in the ledger and their balances.

Front 13

balance sheet

Back 13

shows the financial condition of the enterprise at the end of a period

Front 14

income statement

Back 14

measures results of operations during the period

Front 15

statement of cash flow

Back 15

reports the cash provided and used by the operating investing and financing activities during the period

Front 16

statement of retained earnings

Back 16

reconciles the balance of the retained earnings acct. from the beginning to the end of the period

Front 17

closing entries

Back 17

formal process by which the enterprise reduces all nominal accts. to zero and determines and transfers the net income or net loss to an owners equity acct.

Front 18

Asset Account

Back 18

Debit +
Credit -

Front 19

Liability Account

Back 19

Debit -
Credit +

Front 20

Stock Holders Equity Account

Back 20

Debit -
Credit +

Front 21

Revenue Account

Back 21

Debit -
Credit +

Front 22

Expense Account

Back 22

Debit +
Credit -

Front 23

External Events

Back 23

involves the interactions between an entity and its environment, such as transactions with another entity, a change in the price of a good that an entity buys/sells, a flood or earthquake, or an improvement in technology by a competitor

Front 24

Internal Events

Back 24

Occur within an entity, such as using buildings and machinery in operations, or transferring or consuming raw materials in the production process.

Front 25

T Account

Back 25

shows the effect of transactions on particular asset, liability, equity, revenue or expense account.

Front 26

Prepaid Expenses

Back 26

Expenses paid in cash and recorded as assets before they are used or consumed.

Front 27

Unearned revenue

Back 27

Revenues received in cash and recorded as liabilities before they are earned.

Front 28

Accrued Expenses

Back 28

Revenues earned but not yet received in cash or recorded

Front 29

Accrued Expenses

Back 29

Expenses incurred but not yet paid in cash or recorded.

Front 30

Contra Asset Account

Back 30

offsets an asset account on the balance sheet
(ie: accumulated depreciation)

Front 31

Book Value

Back 31

Difference between the cost and its related accumulated depreciation.

Front 32

Estimated Straight Line Depreciation

Back 32

Cost
Less Salvage Value
Divided by Useful Life

Front 33

Accrued Interest

Back 33

1-Face Value of Note
2-The interest rate
3-Length of time the note is outstanding
(50,000x12%x3/12)

Interest Expense
Interest Payable

Front 34

Bad Debt Expense-J/E

Back 34

Bad Debt Expense
Allowence for Doubtful Accounts

Front 35

What accounts do you close?

Back 35

Temporary accounts: revenues, expenses and dividends
NOT
Permanent accounts: assets, liabilities and stock holder's equity

Front 36

Post Closing Trial Balance

Back 36

Consists only of asset, liability and owners equity accounts

Front 37

Accounting Cycle Summarized

Back 37

1-Enter transactions for journals
2-Post from journals to ledger
3-Take unadjusted trial balance
4-Prepare adj. journal entries and post to ledger
5-Take trial balance after adjusting
6-Prep the financial statements from the second trial balance
7-Prep closing journal entries and post to ledger
8-Post Closing trial Balance
9-Reversing entries (optional)

Front 38

Perpetual Inventory System

Back 38

Records cost of inventory purchased and sold directly in the inventory account as the purchases and sales occur.
Balance in the Inventory account should resent the ending inventory account ...no adjusting entries are needed

Front 39

Periodic Inventory System

Back 39

Inventory account remains unchanged during the period.
Inventory account represents the BI amount throughout period, then at the end of the period the company adjusts the inventory account by closing out the BI and recording the EI.