Accounting

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Transaction

Back 1

Any event that has a financial impact on the business and can be measured reliably

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Assets

Back 2

Cash, Accounts Receivable, Notes Receivable, Inventory, Prepaid Expenses, Land, Buildings, Equipment, Furniture, and Fixtures

Front 3

Liabilities

Back 3

Notes Payable, Accounts Payable, Accrued Liability

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Accrued Liability

Back 4

A liability for an expense that has not yet been paid by the compay. Another name for accrued Expense

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Owners' Equity

Back 5

Common Stock, Retained Earnings, Dividends, Revenues, Expenses

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Time-Period Concept

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Ensures that ccounting inormation is reported at regular intervals

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Revenue Principle

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The basis for recording revenues; tells accountants when to record revenue and the amount of revenue to record

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Matching Principle

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The basis for recording expense. Directs accountants to identify all expenses incurred during the period, to meausre the expenses, and to match them against the revnues earned during that same period.

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Deferral

Back 9

An adjustment for which the business paid or received cash in advance. (prepaid rent/insurance/etc)

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Depreciation

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Expense associated with spreading (allocating) the cost of a plant asset over its useful life

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Accrual

Back 11

An expense or a revenue that occurs before the business pays or receives cash. An accrual is the opposite of a deferral

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Accumulated Depreciation

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The cumulative sum of all depreciation expense from the date of acquiring a plant asset

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Contra Account

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An account that always has a companion account and whose normal balance is opposite that of the companion account

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Book Value

Back 14

The asset's cost minus accumulated depreciation

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Accrued Expense

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An expense incurred but not yet paid in cash

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Closing the Books

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The process of preparing the accounts to begin recording the next period's transactions. Closing the ccounts consists of journalizing an posting the closing entries to set the baliances of the revenue, expense and dividends accounts to zero.

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Closing Entries

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Entries that transfer the revenue, expense, and dividends balances from these respective accounts to the Retained Earnings account

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Temporary Account

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The revenue and expense accounts that relate to a limited period and are closed at the end of the period are temporary accounts. For a corp Dividends are also temporary

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Permanent Account

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Asset, Liability, and stockholders' equity accounts that are not closed at the end of the period.

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Liquidity

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Measure of how quickly an item can be converted to cash

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Operating Cycle

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Time span during which cash is paid for goods and services that are sold to customers who pay the business in cash

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Classified Balance sheet

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A balance sheet that shows current assets separate from long term assets, and current liabilities separate from logn term liabilites

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Single Step income statement

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An income statement that lists all the revenues together under a heading such as Revenues. Expenses appear in a separate category

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Multi-Step income Statement

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An income statement that contains subtotals to highlight important relationships between revenues and expenses

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Current Ratio

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Current Assets divided by curent liabilities. Measures a company's ability to pay current liabilities with current assets

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Debt Ratio

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Ratio of total liabilities to total assets. States the proportion of a company's asset that is financed with debt.

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Contracting

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Relationship between businesses when a company has an account recievable the company is contractually obligated to receive money

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Normal Balances

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Assets-Debit; Liabilities-Credit; Owners' Equity-Credit; Dividends-debit; Revenue-Credit; Expenses-Debit