Accounting Exam 2012
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55 terms
Terms | Definitions |
|---|---|
 GAAP | generally accepted accounting principles =standard accounting rules, guidelines and practices |
| Cost Principle | assets are shown on the balance sheet at the cost of aquisition or construction. |
| Accounting Period | period of time covered by a financial statement |
| Double-Entry Accounting | in each transaction the debits must equal the credits |
| Matching Principle | expenses should be recorded in the same time period as the revenue they helped to earn |
| Source Document | business form that serves as the original source of info that a transaction has occurred |
| Chart of Accounts | a list of all accounts with their name and number |
| Transposition Error | writing a number incorrectly (wrong order) |
| Depreciation | allocation of costs to fixed assets as they are used (decrease in value) |
| Perpetual inventory | continuous record of inventory |
| Periodic Inventory | physical count of inventory every certain number of time periods. |
| Bad Debts | uncollectable accounts owed by customers |
| Trend Analysis | interpreting accounting data from condensed financial statements and predicting future results |
| Quick Ratio | relationship between easily convertible assets and current liabilities =Current Assets (easy)/Current Liabilities : 1 |
| Equity Ratio | relationship between owner's equity and total assets =Owner's Equity/Total Assetsx100% |
| Principle of Objectivity | requires that all accounting records be based on objective evidence |
| The Business Entity Principle | each business is considered a separate unit or entity. The financial data for a business must be kept separate from personal data. |
| Time-Period Principle | use the same period of time for consistency |
| Assets | items owned of value |
| Liabilities | debts of a business |
| Personal Equity | A person's net worth. |
| Ledger | group of accounts |
| Profit | money earned after expenses paid -->increase in owner's equity |
| Revenue | amount earned from sales of goods |
| Expenses | costs of items or services used in the operation of the business. |
| Accrual Basis of Accounting | recording revenue when it is earned; recording expense when it happens |
| Journal | record of transactions in chronological order |
| General Journal | main journal in a business |
| Source Document/examples | a business form that serves as the original source of information that a transaction has occurred -cash sales slip -sales invoice -purchase invoice -cheques issued -cheques received -bank credit memo |
| Worksheet | multi-column form used in preparing financial statements |
| Accolunts Receivable Control Account | represents the sum of all the individual accounts receivable |
| Accounts Payable control account | represents the sum of all the indicidual accounts payable |
| current Assets | converted into cash or used up within 1 year |
| Liquidity Order | order/speed that something can be converted into cash |
| Adjustments | accounting changes recorded to ensure that account balances are correct |
| Contra-Account | offset the value of another account |
| Straight Line Depreciation | same amount of depreciation each period |
| Declining Balance | greater amount of depreciation in the early years % of depreciation on book value |
| Capital Cost Allowance | method of depreciation used under the income tax act |
| Principle of conservatism | accountants should choose accounting methods that result in lower net income and net assets |
| Temporary Accounts | accounts that do not carry over period to period |
| C.O.D | cash on delivery |
| Receipt of Invoice | payment when invoice received |
| Merchandise | goods purchased by a merchandise company with the objective of resale |
| Schedule of Cost of Goods Sold | Merchandise Inventory, Dec1 Add: Purchases Less: Purchases Returns/Allowances Purchases Discounts Net Purchase Cost Add: Transportation-in Total Cost of Merchandise Purchased Cost of Merchandise Avaiable for Sale Less: Merchandise Inventory, Dec 31 Cost of Goods Sold |
| Subsidiary ledger | group of accounts of one type |
| Direct Posting | recording information from the source documents directly into subsidiary ledgers |
| Journalizing Batch Tools | recording the total of a number of source documents of one type in a single entry |
| Condensed Income Statement Base Figure? | net Sales |
| Condensed Balance Sheet Base Figures? | Total Assets Owner's Equity |
| Current Ratio | Current Assets/Current Liabilities:1 |
| Merchandise Turnover | C.O.G.S/average Inventory |
| Accounts Receivable Collection Period | Average Accounts Receivable/Net Sales on Credit x365 |
| Debt Ratio | Total Debt/Total Assets x100% |
| Rate of Return on Average Owner's Equity | Net Income/Average Owner's Equity x100% |
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