1.
a corporation is..: owned by stockholders (or shareholders), they have limited risk may have many owners, usually employ professional managers.
2.
a ledger is a book of...: accounts
3.
a partnership is....: owned by more than one person. the partners share risks.
4.
a person to whom a debt is owed is called a: creditor
5.
a profit and loss statement can be prepared....: at any time
6.
a written promise of a customer to pay the business a sum of money at a future date is called a: note receivable
7.
account: a separate record used to summarize changes in each asset, liability, and owner's equity of a business
8.
account form of balance sheet: a balance sheet in which the assets are on the left and the liabilities and o.e. are on the right
9.
account title: provides a description of a particular type of asset, liability, owner's equity, revenue, or expense
10.
accountants: design the accounting info system and focus on analyzing and interpreting info.
11.
accounting: a system of gathering financial information about a business and reporting this information to users.
12.
accounting clerk: business with large quantities of accounting tasks to perform daily often employ these to record, sort and file accounting info. often they will specialize in cash, payroll, accounts receivable, accounts payable, inventory or purchases.
13.
accounting cycle: the steps involved in accounting for all the business activities during an accounting period.
14.
accounting equation: the accounting equation consists of the three basic accounting elements, Assets = Liabilities + O.E.
15.
accounting information systems: accountants in this area design and implement manual and computerized accounting systems.
16.
accounting period concept: the concept that income determination can be made on a periodic basis
17.
accounts payable: an unwritten promise to pay a supplier for assets purchases or services received
18.
accounts recievable: an amount owed to a business by its customers as a result of the sale of goods or services
19.
accrual basis of accounting: a method of accounting under which revenues are recorded when earned and expenses are recorded when incurred.
20.
adjusted trial balance columns: the third pair of amount columns on the work sheet. they are used to prove the equality of the debits and credits in the general ledger accounts after making all end of period adjustments.
21.
adjusting entries: journal entries made at the end of an accounting period to reflect changes in account balances that are not the direct result of an exchange with an outside party.
22.
analyzing is: looking at events that have taken place and thinking about how they affect the business
23.
another term for the profit and loss statement is....: income statement
24.
asset: an item that is owned by a business and will provide future benefits
25.
auditing: involves the application of standard review and testing procedures to be certain that proper accounting policies and practices have been followed. the purpose is to provide an independent opinion that the financial info about a business is fairly presented in a manner consistent with generally accepted accounting principles
26.
balance: the difference between the footings of an account
27.
balance sheet: reports assets, liabilities, and owners equity on a specific date. it confirms that the accounting equation is in balance.
28.
balance sheet columns: the work sheet columns that show the amounts that will be reported in the balance sheet and the statement of o.e.
29.
book of original entry: the journal or the first formal accounting record of a transaction
30.
book value: the difference between the asset account and its related accumulated depreciation account. the value reflected by the accounting records.
31.
bookeepers: generally supervise the work of accounting clerks, help with daily accounting work, and summarize accounting info. in small to medium size businesses, they may also help managers and owners interpret the accounting info. they usually have one to two years of accounting education and experience as an accounting clerk.
32.
budgeting: the process in which accountants help managers develop a financial plan.
33.
business entity: an individual, association, or organization that engages in economic activities and controls specific economic resources.
34.
business entity concept: the concept that nonbusiness assets and liabilities are not included in the business entity's accounting records
35.
business transaction: an economic event that has a direct impact on the business
36.
capital: another term for o.e., the amount by which the business assets exceed the business liabilities.
37.
cash basis of accounting: a method of accounting under which revenues are recorded when cash is received and expenses are recorded when cash is paid.
38.
certified fraud examiner: a forensic accountant who has passed the exam offered by the association of certified fraud examiners.
39.
certified internal auditor: an internal auditor who has achieved professional recognition by passing the uniform examination offered by the institute of internal auditors.
40.
certified management accountant: an accountant who has passed an exam offered by the institute of management accountants
41.
certified public accountant: public accountants who achieve professional recognition. this is done by meeting certain educational and experience requirements as determined by each state and passing a uniform examination prepared by the american institute of CPAs.
42.
chart of accounts: a list of all accounts used by a business
43.
classified balance sheet: a balance sheet with separate categories for current assets; property, plant, and equipment; current liabilities; and long term liabilities.
44.
classifying is: sorting and grouping similar items together rather than merely keeping a simple, diary like record of numerous events.
45.
closing process: the process of giving zero balances to the temporary accounts so that they can accumulate info for the next accounting period
46.
compound entry: a general journal entry that affects more than two accounts
47.
contra-asset: an account with a credit balance that is deducted from the related asset account on the balance sheet.
48.
controller: the accountant who oversees the entire accounting process and is the principal accounting officer of a company.
49.
correcting entry: an entry to correct an incorrect entry that has been journalized and posted to the wrong account
50.
cost accounting: determining the cost of producing specific products or providing services and analyzing for cost effectiveness.
51.
credit: to enter an amount on the right side of an account
52.
credit balance: the normal balance of liability, o.e. and revenue accounts
53.
cross reference: the info in the posting reference columns of the journal and ledger that provides a link between the journal and ledger
54.
current assets: cash and assets that will be converted into cash or consumed within either one year or the normal operating cycle of the business, whichever is longer.
55.
current liabilities: liabilities that are due within either one year or the normal operating cycle of a business, whichever is longer and that are to be paid out of current assets.
56.
debit: to enter an amount on the left side of an account
57.
debit balance: the normal balance of asset, expense, and drawing accounts
58.
depreciable cost: the cost of an asset that is subject to depreciation.
59.
depreciation: a method of matching an asset's original cost against the revenues produced over its useful life.
60.
double-entry accounting: a system in which each transaction has a dual effect on the accounting elements
61.
drawing: withdrawals that reduce o.e. as a result of the owner taking cash or other assets out of the business for personal use.
62.
expenses: the decrease in assets, or increase in liabilities, as a result of efforts to produce revenue.
63.
FICA refers to: social security
64.
fiscal year: any accounting period of 12 month's duration
65.
fiscal year: a 12 month period for which financial reports are prepared.
66.
footings: the total dollar amounts on the debit and credit sides of an account
67.
forensic accounting: rapidly growing segment of accounting practice. it includes fraud detection, fraud prevention, litigation support, business valuations, expert witness services, and other investigative activities. people who do this often also work for insurance companies, banks, law enforcement agencies, and other organizations.
68.
general ledger: a complete set of all the accounts used by a business. the general ledger accumulates a complete record of the debits and credits made to each acount as a result of entries made in the journal.
69.
general ledger account: an account with columns for the debit and credit transaction and columns for the debit or credit running balance.
70.
generally accepted accounting principles are: rules the securities and exchange commission has over certain firms for them to follow when preparing financial statements.
71.
historical cost principle: a principle that requires assets to be recorded at their actual cost.
72.
income statement: reports the profitability of business operations for a specific period of time.
73.
income statement columns: the work sheet columns that show the amounts that will be reported in the income statement.
74.
income summary: a temporary account used in the closing process to summarize the effects of all revenue and expense accounts.
75.
input: business transactions provide the necessary input for the accounting info system.
76.
interpreting is: deciding the meaning and importance of the info in various reports.
77.
journal: a day by day listing of the transactions of a business
78.
journalizing: entering the transactions in a journal
79.
land does not qualify as a....: current asset
80.
liability: something owed to another business entity
81.
liquidity: a measure of the ease with which an asset will be converted to cash
82.
long term liabilities (long term debt): obligations that are not expected to be paid within a year and do not require the use of current assets.
83.
long-term assets: assets that are expected to serve the business for many years
84.
management advisory services: providing advice to businesses on a wide variety of managerial issues
85.
manufacturing business: a business that makes a product to sell
86.
market value: the amount an item can be sold for under normal economic conditions
87.
matching principle: a principle that requires the matching of revenues earned during an accounting period with the expenses incurred to produce the revenues.
88.
merchandising business: a business that buys a product from another business to sell to customers
89.
modified cash basis: a method of accounting that combines aspects of the cash and accrual methods. it uses the cash basis for recording revenues and most expenses. exceptions are made when cash is paid for assets with useful lives greater than one accounting period.
90.
net income: the excess of total revenues over total revenues for the period
91.
net loss: the excess of total expenses over total revenues for a period
92.
net worth: another term for o.e., the amount by which the business assets exceed the business liabilities
93.
normal balance: the side of an account that is increased
94.
notes payable: a formal written promise to pay a supplier or lender a specified sum of money at a definite future time
95.
operating cycle: the period of time required to purchase supplies and services and convert them back into cash
96.
operating statement: another name for the income statement, which reports the profitability of business operations for a specified period of time.
97.
output: the financial statements are the output of the accounting info system.
98.
owner's equity: the amount by which the business assets exceed the business liabilities.
99.
para-accountants: provide many accounting, auditing, or tax services under the direct supervision of an accountant. typical ones have two year degrees or significant accounting and bookeeping experience
100.
permanent accounts: accounts that accumulate info across accounting periods; all accounts reported on the balance sheet.
101.
plant assets: assets of a durable nature that will be used for operations over several years. examples include buildings and equipment.
102.
plant assets: assets that are expected to serve the business for many years.
103.
post-closing trial balance: prepared after posting the closing entries to prove the equality of the debit and credit balances in the general ledger accounts.
104.
posting: copying the debits and credits from the journal to the ledger accounts
105.
processing: recognizing the effect of transactions on the assets, liabilities, o.e., revenue and expenses of a business.
106.
profit and loss statement: another name for the income statement, which reports the profitability of business operations for a specific period of time.
107.
recording is: entering financial information about events into the accounting system.
108.
report form of balance sheet: a balance sheet in which the liabilities and then o.e. sections are shown below the assets section.
109.
reporting is: telling the results.
110.
revenues: the amount a business charges customers for products sold or services performed.
111.
ruling method: a method of correcting an entry in which a line is drawn through the error and the correct info is placed above it.
112.
salvage value: the expect market value of an asset at the end of its useful life
113.
service business: a business that provides a service. others sell products.
114.
slide error: an error that occurs when debit or credit amounts slide a digit or two to the left or right.
115.
sole proprietorship is..: a business owned by one owner. the owner assumes all risk and makes all decisions
116.
source document: any document that provides info about a business transaction
117.
statement of financial condition: another name for the balance sheet, which reports assets, liabilities, and o.e. on a specific date.
118.
statement of financial position: another name for the balance sheet, which reports assets, liabilities, and o.e. on a specific date
119.
statement of o.e.: report beginning capital plus net income less withdrawals to compute ending capital.
120.
straight-line depreciation: a depreciation method in which the depreciable cost is divided by the estimated useful life.
121.
summarizing is: the aggregation of many similar events to provide info that is easy to understand.
122.
temporary accounts: accounts that do not accumulate info across accounting periods but are closed, such as the drawing account and all income statement accounts.
123.
The basic accounting theory is based on...: double entry
124.
the difference between costs of goods sold and their selling price is: gross profit
125.
the excess of current assets over current liabilities is called: working capital
126.
the fifth step of the accounting process is: reporting
127.
the first step of the accounting process is: analyzing
128.
the fourth step of the accounting process: summarizing
129.
the group of accounts which you credit when increased are: liabilites and capital
130.
the group of accounts which you debit when increased are: assets and expenses
131.
the memory device for remembering the six steps of the accounting process is: all red cars sound really interesting
132.
the second step of the accounting process is: recording
133.
the sixth step of the accounting process is: interpreting
134.
the third step of the accounting process is: classifying
135.
transposition error: an error that occurs when two digits are reversed.
136.
trial balance: a list used to prove that the totals of the debit and credit balances in the ledger accounts are equal.
137.
trial balance: a list of all accounts, showing the title and balance of each account, used to prove that the sum of the debits equals the sum of the credits.
138.
two column general journal: a journal with only two amount columns, one for debit amounts and one for credit amounts.
139.
undepreciated cost: the difference between the asset account and its related accumulated depreciation account. also known as book value.
140.
useful life: the period of time that an asset is expected to help produce revenues
141.
withdrawals: reduce owners equity as a result of the owner taking cash or other assets out of the business for personal use.
142.
work sheet: a form used to pull together all of the information needed to enter adjusting entries and prepare the financial statements.
