Acct 315 - Chapter 3

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Account

Back 1

An individual accounting record of increases and decreases in a specific asset, liability, or shareholders' equity item.

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Accounting Cycle

Back 2

A series of steps followed by accountants in preparing financial statements.

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Accounting information system

Back 3

The system of collecting and processing transaction data and communicating financial information to interested parties.

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Accrued Expenses

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Expenses incurred, but not yet paid or recorded at the statement date

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Accrued Revenues

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Revenues earned, but not yet received in cash or recorded at the statement date

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Accumulated Other Comprehensive Income

Back 6

The cumulative total of all past charges and credits to OCI up to the statement of financial position date. It is similar to retained earnings, but for OCI items

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Adjusted Trial Balance

Back 7

A list of all open accounts in the ledger and their balances have taken immediately after all adjustments have been posted

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Adjusted Entries

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Journal enteries made at the end of the accounting period to ensure that the revenues recognition and matching principles are followed

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Balance Sheet

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A financial statement that shows an enterprise's financial condition at the end of a period (under ASPE). Also known as Statement of Financial Position.

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Book Value

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The amount at which an asset is recognized in the statement of financial position. also known as Carrying amount.

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Carrying Amount

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The amount at which an asset is recognized in the statement of financial position. also known as the book value.

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Closing Entries

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he journal enteries that close the temporary accounts in order to start a new financial reporting period these amounts are posted to retained earnings.

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Closing Process

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The procedure generally followed to reduce the balance of temporary accounts to zero in order to prepare the accounts for the next period's transactions

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Contra Asset Account

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An account that is offset against an asset account on the statement of financial position

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Credit

Back 15

the right sode of a general ledger acocunt

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Debit

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The left side of the general ledger account

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Depreciation/Amortization

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The cost of tangible capital assets allocated to the accounting periods benefiting their use. (amortization used for intangible assets)

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Discontinued Cash Flow Model

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A model for measuring fair value that deals with the uncertainty and the time value of money. It has two approaches: the traditional approach, and the expected cash flow approach.

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Double-Entry Accounting

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System of accounting requiring the equality of debits and credits when recording transactions, whcih helps prove the accuracy of the recorded amounts.

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Event

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Something of consequence that happens, which is generally the source of changes in asset, liability, and equity balances. An event may be internal or external.

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Expected Cash Flow Approach

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An approach to the discounted cash flow model where a risk-free discount rate is used to discount cash flows that have been adjusted for uncertainty. the discount rate is the risk-free rate and the cash flow uncertainty is dealt with by using probabilities.

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Fair Value Hierarchy

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An estimate of the price an enterprise would have received if it had sold the asset or would have paid if it had been relieved of the liability, on the measurment date in an arm's length exchange motivated by normal business considerations.

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Financial Statements

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The principal means through which financial information is communicated to those outside an enterprise. they provide a firm's history, quantifies in money terms.

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General Journal

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A chronological listing of transactions and other events expressed in terms of debits and credits to particular accounts.

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General Ledger

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A collection of all asset, liability, shareholder's equity, revenue, and expense accounts and their respective balances.

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Highest and Best Use

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A concept for valuing assets that assumes the highest value that the market would place on the asset considering uses that are possible, legally permissible, and financially feasible.

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Income Statement

Back 27

A report that measures the success of a company's operations used for a specific time period (under ASPE)

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Journal

Back 28

The book of original entry where transactions and selected other events are initially recorded.

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Journal Entries

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Most Advantageous Market

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A concept used for measuring fair value that considers the value based on the market that would pay the most for the asset

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Periodic Inventory System

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The inventory system where a purchases account is used and the inventory account is unchanged during the period. Cost of goods sold is determined by adding the beginning inventory to the net purchases and deducting ending inventory.

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Permanent Accounts

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All of the asset, liability, and equity accounts that appear on the balance sheet. "real accounts"

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Perpetual Inventory System

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The inventory recording system where purchases and sales are recorded in the inventory account as they occur.

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Post-Closing Trial Balance

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A trial balance taken immediately after closing enteries have been posted.

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Posting

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The process whereby items entered in a general journal must be transferred to the general ledger.

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Prepaid Expenses

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

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Principal Market

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The market that the entity normally uses to buy and sell or transfer things, used for emasuring fair value.

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Reversing Entries

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A journal entry made at the beginning of the next accounting period that is the exact oppisite of the related adjusting journal entry made in the previoud period.

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Special Journals

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Journals that summarize transactions possessing a similar characterisitc.

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Statement of Changes in Cash Flow

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A financial statement that provides information about the cash inflows (receipts) and outflows (payments) for a specific period of time. It is divided into operating activities, investing activities, and financing activities, and allows users to assess an enterprise's capacity to generate cash and cash equivalents and its needs for cash resources.

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Statement of Changes in Shareholder's Equity

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The financial statement that reconciles the balance of the retained earnings account, common shares, and other shareholders' equity accounts from the beginning to the end of the period (under IFRS)

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Statement of Comprehensive Income

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The financial Statement that reconciles net income to comprehensive income; reconciling items include unrealized gains and losses on certain financial instruments and debits/credits from a related party or other transactions not recognized in net income (under IFRS). Come companies provide a combined statement of income and comprehensive income.

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Statement of Financial Position

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The financial statement that shows an enterprise's financial condition at the end of a period. Balance Sheet.

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Statement of Retained Earnings

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The financial statement that reconciles the balance of the retained earnings account from the beginning to the end of the period (under ASPE)

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Subsidiary Ledger

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A ledger that contains the details related to a given general ledger acocunt.

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Temporary Accounts

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Revenue, expense, and dividend accounts; except for dividends, they appear on the statement of comprehensive income. Temporary accounts are closed at the end of each fiscal year; permanent accounts are left open. Nominal Accounts.

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Traditional Discontinued Cash Flow Approach

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An approach to the discounted cash flow model where the discount rate reflects all risks in the cash flows but the cash flows are assumed to be certain. The stream of contracted cash flows in discounted, and the dicount rate is adjusted to accommodate their riskiness.

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Transaction

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An external event involving a transfer or exchange between two or more entries or parties.

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Trial Balance

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

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Unearned Revenues

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

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Useful Life

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The term of service provided by a capital asset, ofter many years long.