Accounting Unit 3 And 4 Definitions

Front 1

Profit

Back 1

increase in owner’s equity that results from successful operation of abusiness.

Front 2

Revenue

Back 2

amounts earnedfrom sale of goods or services during routine operation of business

Front 3

Expenses

Back 3

costs ofitems or services used up in the routine operation of a business.

Front 4

Net Income

Back 4

differencebetween revenue and expenses when revenue is greater than expenses

Front 5

Net Loss

Back 5

differencebetween revenue and expenses when revenue is less than expenses

Front 6

Income Statement

Back 6

presents revenue,expenses, net income/loss for a specific period of time

Front 7

Accounting Period

Back 7

Period of timecovered by financial statements

Front 8

Time-Period Principle

Back 8

requires thedefinition and use of the same period of time for each accounting period

Front 9

Accrual Basis of Accounting

Back 9

Matches revenue earned with expenses incurred toproduce that revenue during the accounting period

Front 10

Revenuerecognition principle

Back 10

statesthat revenue is recognized at the time the revenue is definitely earned

Front 11

Revenueincreases owner’s equity

Back 11

N/A

Front 12

Cash basis of accounting: recognizes revenue and expensesonly when cash changes hands

Back 12

N/A

Front 13

Revenue is recorded on the credit side

Back 13

N/A

Front 14

Expenses decrease owner’s equity

Back 14

N/A

Front 15

Expenses are recorded on the debit side

Back 15

N/A

Front 16

Drawings

Back 16

the account that records the withdrawal of assets on theleft side and the liabilities and owner’s equity on the right side

Front 17

Accountingform balance sheet

Back 17

lists the assets on the left side and the liabilities andowner’s equity on the right side

Front 18

Reportform balance sheet

Back 18

liststhe assets, liabilities and owner’s equity vertically

Front 19

The income statement is prepared before the balance sheet

Back 19

N/A

Front 20

Condensedstatement

Back 20

a financial statement that provides single totals for keyitems to highlight certain information

Front 21

Journalizing

Back 21

recording transactions in a journal

Front 22

Journal

Back 22

record of transactions recorded in chronological order

Front 23

General Journal

Back 23

often main journal of a business

Front 24

The year and month are shown on each journal page

Back 24

N/A

Front 25

Debit is shown first

Back 25

N/A

Front 26

Credit is indented

Back 26

N/A

Front 27

The explanation incudes an invoice or cheque #

Back 27

N/A

Front 28

Journal

Back 28

presents a chronological history of all the company’s transactions

Front 29

For every debit amount there must be an credit amount.

Back 29

N/A

Front 30

Posting

Back 30

the transfer of information from a journal to the general ledger

Front 31

Balance column ledger account

Back 31

a three column account that provides a running balance on each line.

Front 32

The DR./CR. (debit/credit) column indicates whether the balance is a debit or a credit.

Back 32

N/A

Front 33

Chart of accounts

Back 33

a list of names and account numbers of all the accounts in a ledger.

Front 34

Audit

Back 34

a systematic check of accounting records and procedures by an accountant

Front 35

Opening Entry

Back 35

records assets, liabilities, and OE in a journal when a business first begins operations.

Front 36

Compound Entry

Back 36

has more than one credit

Front 37

A trial balance is proof of the mathematical accuracy of the ledger.

Back 37

N/A

Front 38

Accounting Cycle

Back 38

set of accounting procedures performed in each accounting period.

Front 39

Source Document

Back 39

any business form that serves as the original source of info that a transaction has occurred. A source doc must be prepared for all cash sales by a business transaction.

Front 40

Cash Sales Slip

Back 40

provides details of the sale is prepared for all cash sales by a business.

Front 41

Sales Invoice

Back 41

bill completed by the seller and given to the buyer as a record of acredit sale

Front 42

Purchase Invoice

Back 42

bill received by purchaser us proof of a purchase on account.

Front 43

Cheques are issued by a business to make cash purchases and to pay bills.

Back 43

N/A

Front 44

Endorsement

Back 44

signature placed on back of a check by the person or companydepositing the check

Front 45

Restrictive Endorsement

Back 45

an instruction on the back of a check to control whathappens to the funds.

Front 46

Cheques are received as payments for amounts owed or when customers buysomething for cash.

Back 46

N/A

Front 47

Bank Credit Memo

Back 47

is used as basis for increasing a customer’s bank account.

Front 48

Bank Debit Memo

Back 48

used as the basis for decreasing a customer’s bank account.

Front 49

Principle of Objectivity

Back 49

Requires that the accounting data should be free fromany bias and should be verifiable to support the value used to record transactions.

Front 50

Data Entry Sheet

Back 50

used to organize the information to be entered into acomputerized accounting system. This includes accounts to be debited and credited, the amount, and the explanation of the transaction.