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132 Cards in this Set

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Account

The form used to record additions and deductions for each individual asset, liability, owner's equity, revenue and expense.

Account form of balance sheet

A balance sheet with assets on the left-hand side and liabilities and capital on the right-hand side.

Accounting

The process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.

Accounting Cycle

The principal accounting procedures employed to process transactions during a fiscal period.

Accounting Equation

The expression of the relationship between assets, liabilities and capital. Most commonly stated as Assets= Liabilities + Owner's Equity

Account Payable

A liability created by a purchase made on credit.

Account Receivable

A claim against a customer for sales made on credit.

Accounts Payable Ledger

The subsidiary ledger containing the individual accounts with suppliers (creditors)

Accounts Receivable Ledger

The subsidiary ledger containing the individual accounts with customers (debtors)

Accrual

An expense or a revenue that gradually increases with the passage of time


Accrual Basis Accounting

The reporting of all revenues in the period earned, all expenses in the period consumed, all assets in the period purchased, and all liabilities in the period incurred; contrasted with the cash basis of accounting.

Adjusting Entry

An entry required at the end of an accounting period to record an internal transaction and to bring ledger up to date

Articles of Partnership

A formal written contract creating a partnership

Asset

Property owned by a business enterprise

Balance of an account

The amount of difference between the debits and credits that have been entered into an account

Balance Sheet

A financial statement listing the assets, liabilities, and capital of a business entity as of a specific date

Bond

A form of interest-bearing note employed by corporations to borrow on a long-term basis

Bookkeeping

the recording of business data in a prescribed manner

Budgeting

The process of establishing specific goals for future operations and making periodic comparisons of actual results with these goals

Business Entity Concept

The concept that assumes that accounting applies to individual economic units and that each unit is separate and distinct from the persons who supply its assets

Business Transaction

The occurrence of an event or of a condition that must be recorded in the accounting records

Capital

The rights (equity) of the owners in a business enterprise

Capital Statement

A summary of the changes in the capital of a business entity during a specific period of time

Capital Stock

Shares of ownership of a corporation

Cash Basis Accounting

The reporting of all revenues and expenses in the period during which cash is received or paid

Cash Dividend

A distribution of cash by a corporation to its shareholders

Cash Payments/Receipts Journal

The journal in which all cash payments/receipts are recorded

Certified Public Accountant (CPA)

An accountant who meets licensing requirements for engaging in the practice of public accounting as a CPA

Chart of Accounts

A listing of all the accounts used by the business enterprise

Check Register

A modified form of cash payments journal used to record all transactions paid by check

Closing entry

AN entry necessary to eliminate the balance of a temporary account in preparation for the following accounting period

Common Stock

The basic ownership class of corporate capital stock

Conservatism

The concept that dictates that in selecting among alternatives, the method or procedure that yields the lesser amount of net income or asset value should be selected

Consistency

The concept that assumes that the same generally accepted accounting principles have been applied in the preparation of successive financial statements

Consolidation

The creation of a new corporation by the transfer of assets and liabilities from two or more existing corporations

Contingent Liability

a potential obligation that will materialize only if certain asset occur in the future

Controlling account

Account in the general ledger that summarizes the balances of a subsidiary ledger

Corporation

A separate legal entity that is organized in accordance with law and in which ownership is divided into shares of stockC

Cost ledger

A subsidiary ledger employed in a job order cost system and which contains an account for each job order

Cost Principle

The principle that assumes that the monetary record for properties and services purchased by a business should be maintained in terms of cost

Credit

1. The right side of an account


2. The amount entered on the right side of an account


3. To enter an amount on the right side of an account

Credit Memorandum

The form issued by a seller to inform a debtor that a credit has been posted to the debtor's account receivable

Current Asset

Cash or another asset that may reasonably be expected to be realized in cash or sold or consumed, usually within a year or less through the normal operations of a business

Current Liability

A liability that will be due within a short time (usually one year or less) and that is to be paid out of current assets

Current Ratio

The ratio of current assets to current liabilities

Debit

1. The left side of an account


2. The amount entered on the left side of an account


3. To enter an amount on the left side of an account

Debit Memorandum

The form issued by a purchaser to inform a creditor that a debit has been posted to the creditor's account payable

Deferral

A postponement of the recognition of an expense already paid or a revenue already received.

Deficiency

The debit balance in the capital account or statement of owner's equity of a sole proprietor or a partnership

Deficit

A debit balance in the retained earnings account

Depletion

The cost of metal ores and other minerals removed from the earth

Depreciation

The periodic cost expiration of all plant assets except land

Differential analysis

Area of accounting concerned with the effect of alternative courses of action on revenues and costs

Differential cost

The amount of increase or decrease in cost that is expected from a particular course of action compared with an alternative


Differential Revenue

The amount of increase or decrease in revenue expected from a particular course of action as compared with an alternativeD

Direct Expense

An expense directly traceable to or incurred for the sole benefit of a specific department and ordinarily subject to the control of the department manager

Discount Rate

The rate used in computing the interest to be deducted from the maturity value of a note

Dishonored Note Receivable

A note which the maker fails to pay on the due date

Dividend

A distribution of earnings of a corporation to its owners (stockholders).


Double-entry accounting

A system for recording transactions based on recording increases and decreases in accounts so that debits always equal credits

Equity

The right or claim to the properties of a business enterprise

Equity Method

A method of Accounting for investments in common stock, by which the investment account is adjusted for the investor's share of periodic net income and property dividends of the investee

Equity per share

The ratio of stockholder's equity to the related number of shares of stock outsanding

Equity security

Preferred or common stock

Expense

The amount of assets consumed or services used in the process of earning revenue

Financial Forecast

A statement indicating an enterprise's financial plans and expectations for the future

Fiscal Year

The annual accounting period adopted by an enterprise

Fixed expense

An expense that tends to remain constant in amount regardless of variations in volume of activity

Flowchart

A chart depicting in graphic form the major data processing operations related to accounting for a transaction or a series of closely related transactions

Fund

1. Segregation of cash for a special purpose


2. Working capital or cash reported in the funds statement


3. In accounting for nonprofit organizations, an accounting entity with accounts maintained for recording assets, liabilities, capital (called fund balance), revenues and expenditures for a particular purpose



Funded

An appropriation of retained earnings accompanied by a segregation of cash or marketable securities

Funds statement

The statement of changes in financial position

General Expense

Expense incurred in the general operation of a business

General Journal

he two-column form used to record journal entries that do not "fit" in any special journals

General Ledger

The principal ledger, when used in conjunction with subsidiary ledgers, that contains all of the balance sheet and income statement accounts



Generally Accepted Accounting Principles

Generally accepted guidelines for the preparation of financial statements

Going Concern Concept

The concept that assumes that a business entity has a reasonable expectation of continuing in business at a profit for an indefinite period of time

Goodwill

An intangible asset that attaches to a business as a result of such favorable factors as location, product superiority regulation and management skill.

Gross Profit

The excess of net revenue from sales over the cost of merchandise sold

Historical Cost

The cash or equivalent outlay for goods and services acquired

Income from operations

The excess of gross profit over total operating expenses

Income statement

A summary of the revenues and expenses of a business entity for a specific period of time

Income Summary Account

The account used in the closing process for summarizing the revenue and expense accounts

Independent Auditor's Report

A report accompanying financial statements, in which CPAs express an opinion as to the fairness of the statements

Indirect Expense

An expense that is incurred for an entire business enterprise as a unit and that is not subject to the control of individual department managers



Intangible Assets

A long-lived asset that is useful in the operations of an enterprise, is not held for sale, and is without physical qualities

Interim Statement

A financial statement issued for a period covering less than a fiscal year

Invoice

A bill provided by the seller (referred to as a sales invoice ) to a purchaser (referred to as a purchase invoice) for items purchased.

Ledger

The group of accounts used by an enterprise

Liability

A debt of a business enterprise

Liquidation

The winding-up process when a partnership goes out of business

Long-term investment

An investment that is not intended to be a ready source of cash in the normal operations of a business and that is listed in the "investments" section of the balance sheet

Long-term liability

A liability that is not due for a comparatively long time (usually for more than a year)

Natural Business Year

A year that ends when a business' activities have reached the lowest point in its annual operating cycle

Net Income

The final figure in the income statement when revenues exceed expenses

Net Loss

The final figure in the income statement when expenses exceeded revenuw

Net Worth

The owner's equity in a business

Nominal Account

A revenue or expense account periodically closed to the income summary account; a temporary capital account

Note Payable

A written promise to pay, representing an amount owed by a business

Note receivable

A written promise to pay, representing an amount to be received by the business

Opportunity COst

The amount of income that would result from the best available alternative to a proposed use of cash or its equivalent.

Owner's Equity

The rights of the owners in a business enterprise

Partnership

A business owed by two or more individuals

Plant Asset

A tangible asset of a relatively fixed or permanent nature owed by a business enterprise

Post-closing trial balance

A trial balance prepared after all the temporary accounts have been closed

Posting

The process of transferring debits and credits from a journal to the accounts in the ledger

Prepaid expense

A purchased commodity or service that has not been consumed at the end of an accounting period.

Private Accounting

The profession whose members are accountants employed by a business firm or a nonprofit org

Profitability

Ability of a firm to earn income

Promissory Note

A written promise to pay a sum in money on demand or at a definite time

Public Accounting

The profession whose members render accounting services on a fee basis

Purchases Journal

The journal in which all items purchased on accounts are recorded.

Real Account

A balance sheet account

Realization

The sale of assets when a partnership is being liquidated

Retained eanings

Net income retained in a coprporation

Revenue

The amount charged to customers for goods sold or services rendered

Sales Journal

The journal in which all sales of merchandise on account are recorded

Securities and Exchange Commission

The agency that exercise a dominant influence over the development of accounting principles for most companies whose securities are traded in stock exchanges.

Slide

An erroneous movement of all digits in a number, one or more spaces to the right or the left, such as writing P542 as P5420

Sole Proprietorship

A busniess owned by one individual

Solvency

The ability of a firm to pay its debts as they come due

Special Journal

A journal designed to record a single type of transaction

Statements of Assets and Liabilities

The principal financial statement for individuals, presenting both the cost and the estimated market values of assets, a list of liabilities and net equity

Stock DIvidend

Distribution of a company's own stock to its shareholders

Stockholder's equity

The equity of the shareholders in a corporation

Sunk Cost

A cost that is not affected by subsequent decisions

TAccount

A form of account resembling the letter T

Temporary capital account

A revenue or expense account periodically closed t the income summary account; a nominal account

Trial Balance

A summary listing of the balances and the titles of the accounts

Unearned Revenue
Revenue received in advance of its being earned

Voucher

A document that serves as evidence of authority to pay cash

Work sheet

A working paper used to assist in the preparation of financial statements