Accounting Mid-Term

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Planning, recording, analyzing, and interpreting financial information

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accounting

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a planned process for providing financial information that will be useful to management

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accounting system

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organized summaries of a business's financial activities

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accounting records

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financial reports that summarize the financial condition and operations of a business

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financial statements

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a business that performs an activity for a fee

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service business

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a business owned by one person

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proprietorship

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anything of value that is owned

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asset

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financial rights to the assets of a business

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equities

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an amount owed by a buesiness

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liability

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the amount remaining after the value of all liabilities is subtracted from the value of all assets

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owner's equity

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an equation showing the relationship among assets, liabilities, and owner's equity

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accounting equation

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the principles of right and wrong that guide an individual in making decisions

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ethics

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the use of ethics in making business decisions

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business ethics

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a business activity that changes assets, liabilities, or owner's equity

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transaction

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a record summarizing all the information pertaining to a single item in the accounting equation

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account

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the name given to an account

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account title

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the amount in an account

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account balance

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the account used to summarize the owner's equity in a business

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capital

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an increase in owner's equity resulting from the operation of a business

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revenue

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a sale for which cash will be received at a later date

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sale on account

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a decrease in owner's equity resulting from the operation of a business

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expense

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assets taken out of a business for the owner's personal use

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withdrawals

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an accounting device used to analyze transactions

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T account

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an amount recorded on the left side of a T account

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debit

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an amount recorded on the right side of a t account

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credit

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the side of the account that's increased

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normal balance

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a list of accounts used by a business

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chart of accounts

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a form for recording transactions in chronological order

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journal

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recording transactions in a journal

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journalizing

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a journal amount column headed with an account title

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special amount column

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a journal amount column thats not headed with an account title

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general amount column

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information for each transaction recorded in a journal

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entry

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the recording of debit and credit parts of a transaction

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double-entry accounting

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a business paper from which information is obtained for a journal entry

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source document

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a business form ordering a bank to pay cash from a bank account

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check

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a form describing the goods or services sold, the quantity, and the price

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invoice

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an invoice used as a source document for recording a sale on account

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sales invoice

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a business form giving written acknowledgment for cash received

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receipt

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a form on which a brief message is written describing a transaction

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memorandum

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determining that the amount of cash agrees with the accounting records

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proving cash

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a group of accounts

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ledger

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a ledger that contains all accounts needed to prepare financial statements

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general ledger

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the number assigned to an account

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account number

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the procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current

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file maintenance

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writing an account title and number on the heading of an account

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opening an account

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transferring information from a journal entry to a ledger account

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posting

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a journal entry made to correct an error in a previous journal entry

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correcting entry

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a statement that guides the ethical behavior of a company and its employees

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code of conduct

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a bank account from which payments can be ordered by a depositor

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checking account

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a signature or stamp on the back of a check, transferring ownership

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endorsement

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an endorsement consisting only of the endorser's signature

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blank endorsement

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an endorsement indicating a new owner of a check

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special endorsement

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an endorsement restricting further transfer of a check's ownership

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restrictive endorsement

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a check with a future date on it

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postdated check

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a report of deposits, withdrawals, and bank balances sent to a depositor by a bank

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bank statement

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a check that a bank refused to pay

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dishonored check

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a computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents

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electric funds transfer

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a bank card that automatically deducts that amount of a purchase from the checking account of the cardholder

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debit card

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an amount of cash kept on hand and used for making small payments

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petty cash

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a form showing proof of a petty cash payment

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petty cash slip

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the length of time for which a business summarizes and reports financial information

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fiscal period

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a columnar accounting form used to summarize the general ledger information needed to prepare financial statements

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work sheet

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a proof of equality of debits and credits in a general ledger

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trial balance

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changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period

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adjustments

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a financial statement that reports assets, liabilities, and owner's equity on a specific date

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balance sheet

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a financial statement showing the revenue and expenses for a fiscal period

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income statement

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the difference between total revenue and total expenses when totale revenue is greater

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net income

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the difference between total revenue and total expenses when total expenses are greater

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net loss

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journal entries recorded to update general ledger accounts at the end of a fiscal period

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adjusting entries

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accounts used to accumulate information from one fiscal period to the next

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permanent accounts

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accounts used to accumulate information until its transferred to the owner's capital account

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temporary account

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journal entries used to prepare temporary accounts for a new fiscal period

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closing entries

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a trial balance prepared after the closing entries are posted

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post-closing trial balance

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the series of accounting activities included in recording financial information for a fiscal period

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accounting cycle

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language of business

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accounting

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keeping personal and business records separate is an application of

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business entity

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concept applied when business transactions are stated in numbers that have common values; using a common unit of measurement

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Unit of Measurement

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concept applied when revenue is recorded at the time goods or services are sold

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Realization of Revenue

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Concept applied when a source document is prepared for each transaction

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objective evidence

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Concept applied when the same accounting procedures are followed in the same way in each accounting period

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consistent reporting

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Concept applied when changes in financial information are reported for a specific period of time in the form of financial statements

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accounting period cycle

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Concept applied when revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period

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matching expenses with revenue

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concept applied when financial statements contain all information necessary to understand a business's financial condition

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adequate disclosure

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concept when financial statements are prepared with the expectation that a business will remain in operation indefinitely

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going concern