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82 Cards in this Set

  • Front
  • Back
Factors that shape accounting systems are
nature of business

size of firm

volume of data

informational demands that management places on system
EVENT
a happening of consequence. Source or cause of changes in assets, liabilities, and equity, may be internal or external
TRANSACTION
an EXTERNAL event involving a transfer between two or more entities
ACCOUNT
A systematic arrangement that shows the effect of transactions and other events on a specific asset or equity.
REAL ACCOUNTS
asset, liability, and equity accounts.
Another name for real accounts
Permanent
Real accounts are found on the ___________
balance sheet
NOMINAL ACCOUNTS
revenue, expense and dividend accounts
Nominal Accounts appear on the
income statement (except for dividends)
(Nominal/real) accounts are periodically closed
Nominal
LEDGER
the book containing the accounts
a__________ ledger is a collection of all the asset, liaility, owners' equity, revenue and expense accounts
general
a___________ ledger contains the details related to a given general ledger account
subsidiary
JOURNAL
The book of original entry where transactions and selected other events are originally recorded.
POSTING
Theprocess of transferring the essential facts and figures from the book of original entry to the ledger accounts
TRIAL BALANCE
a list of all open accounts in the ledger and their balances.
A trial balace taken immediately after closing entries have been posted is called a_____________
post-closing or after closing trial balance
ADJUSTING ENTRIES
Entries made at the end of an accounting period to bring all accounts up to date on an acrual accounting basis so that correct financial statements can be prepared.
CLOSING ENTRIES
formal process by which all nominal accounts are reduced to zero and the net income or net loss is determined and transferred to an owners' equity account.
Left
DEBIT
LEFT
debit
RIGHT
credit
the two-sided effect of each transaction is recorded in appropriate accounts in the ____ accounting system
double-entry
______ + ________ = _________ is the basic accounting equation
Assets = Liability + Stockholders equity
Common stock and retained earnings are reported in the __________ section of the balance sheet
Stockholders' equity
Accounts commonly used in the equity section of a corporation's balance sheet
Common Stock

Additional Paid-in Capital

Dividends

Retained Earnings
In a proprietorship, or partnership a _______ account is used to indicate the owner's investment in the company.
Capital
A __________ account is used to indicate withdrawls by the owners in a proprietorship or partnership
Drawing
a convienient method of illustrating the effect of transactions on particular asset, liabilty, equity, revenue and expense items
T-account
every general journal entry consists of four parts
1) the accounts and amounts to be debited

2) the accounts and amounts ot be credited

3) a date

4) an explanation
when items entered in the general journal are transferred ot the general ledger
posting
The number in the posting reference column serves 2 purposes
1) indicates the ledger account number of the account involved

2) indicates that the posting has been completed for a particular item
a list of accounts and their balances at a given time
trial balance
the primary purpose of a trial balance is to prove
the mathematical equality of the debits and credits after posting
The procedures for preparing a trial balance consist of
Listing the account titles and their balances

totaling the debit and credit columns

proving the equality of the two columns
when items entered in the general journal are transferred ot the general ledger
posting
The number in the posting reference column serves 2 purposes
1) indicates the ledger account number of the account involved

2) indicates that the posting has been completed for a particular item
a list of accounts and their balances at a given time
trial balance
the primary purpose of a trial balance is to prove
the mathematical equality of the debits and credits after posting
The procedures for preparing a trial balance consist of
Listing the account titles and their balances

totaling the debit and credit columns

proving the equality of the two columns
when items entered in the general journal are transferred ot the general ledger
posting
The number in the posting reference column serves 2 purposes
1) indicates the ledger account number of the account involved

2) indicates that the posting has been completed for a particular item
a list of accounts and their balances at a given time
trial balance
the primary purpose of a trial balance is to prove
the mathematical equality of the debits and credits after posting
The procedures for preparing a trial balance consist of
Listing the account titles and their balances

totaling the debit and credit columns

proving the equality of the two columns
Trial balances may balance even when
1) a transaction is not journalized

2) correct journal entry is not posted

3) journal entry is posted twice

4) incorrect accounts are used in journalizing or posting

5) offsetting errors are made in recording the amount of the transaction
The trial balance may not contain up-to-date information because
1) some events are not journalized daily because it is not expedient (consumption of supplies

2) costs expire with the passage of time rather than as a result of recurring daily transactions (equipment deteriorization)

some items may be unrecorded such as a utility service bill that will not be received until the next accounting period
Adjustments are often prepared after the balance sheet date, however, the entries are dated ______.
as of the balance sheet date
Ajusting entries can be classified either as ________ or _____________.
prepayments or accrurals
subcategories of prepayments
Prepaid expenses
Unearned revenues
Subcategories of Accrurals
Accrued Revenues
Accrued Expenses
Prepayments are either ______ or _________
prepaid expenses
unearned revenues
The asset and liabiliy are _________ and the related expense and revenue are __________.
overstated; understated
Expenses paid in cash and recorded as assets before they are used or consued are identified as_________.
prepaid expenses
Prepayments often occur in regard to
insurance

supplies

advertising

rent

when buildings and equipment are purchased
Prepaid expenses expire with _____________ or through ___________.
passage of time; use and consumption
Prior to adjustment, assets are _________ and expenses are ____________.
overstated, understated
The prepaid expense adjusting entry results in a _____ to a(n) _________ account and a ________ to a(n) asset account
debit, expense; credit, asset
The term of service is comony referred to as the ____________ of the asset
useful life
An account that is offset against an assset account on the balance sheet
contra asset account
The difference between the cost of any depriciable asset and its related accumulated dereciation is its
book value
Revenues received in cash and recorded as liabilities before they are earned are called ______.
unearned revenues
examples of unearned revenues
rent
magazine subscriptions
customer deposits for futher service
recipts from the sale of goods or services not delivered
In the case of unearned revenues that have not been adjusted liabilities are _______ and revenues are ___________
overstated; understated
adjusting entries for accrurals are required to record ___________ and ___________ in the
revenues earned, expeneses incurred
The adjusting entry of accruals will ___________ a balance sheet and _______ an income statment account
increase; increase
Examples of accrued revenues that accumulate with the passing of time are
interest revenue
rent revenue
an example of services that are performed but neither billed or collected is
commissions and fees
an ajusting entry for ______ results in a debit (_______) to an asset account and a credit (________) to a revenue account
accrued revenues; increase, increase
Proper matching of revenues and expenses dictates recording bad debts as a(n) _________ of ___________ instead of the period ______________.
expense; the period revenue is earned; in which the accounts are written off
The purpose of an adjusted trial balance is to
show the effects of all financial events that have occurred during the accounting period
The procedure generally followed to reduce the balance of nominal (temporary) accounts to zero in order to prepare the accounts for the next period's transactions is called
CLOSING
In the closin process all of the revenue and expense account balances are transferred to a clearing or suspense account called
Income summary
__________ and ____________ are matched in the Income Summary account
Revenues and Expenses
the inventory system where purchases and sales are recorded directly into the ______ as purchases and sales occur.
inventory account
THe post closing trial balance consits of only the _____, ________ and ______ accounts
asset, liabilty, and owners' equity
A _______________ is made at te beginning of the next accounting period and is the exact opposite of the related adjusting entry made in the previous period.
reversing entries
List the steps in the accounting cycle in logical sequence
-enter the transactions in the appropriate journals
-post from journal to ledger
-take unajusted trial balance
-prepare adjusting journal entries and post to ledgers
-take a trial balance after adjusting
-pepare financial statements from second trial balance
-prepare closing jounal entries and post to ledger
-take a trial balance after closing
-prepare reversing entries and post to ledger
Work Sheet Columns
-Trial Balance Columns
-Adjustment Columns
-Adjusted Trial Balance
-Income Statment and Balance sheet Columns
-Income Taxes and Net Income
Three inventory accounts
Work in Process
Raw Materials
Finished Goods
Examples of current assets on the balance sheet
interest recievable
unexpired insurance
prepaid rent expense
The amount of Allowance for Doubtful Accounts is deductedfrom total of ________,_________, and __________
accounts, notes, interest recievable