Chapter 4 Terms
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17 terms
Terms | Definitions |
|---|---|
 Accounting Cycle | a series of steps whose ultimate purpose is to provide useful information to decision makers |
| Permanent Accounts | also called real accounts |
| Permanent Accounts | Balance sheet accounts, such as Cash and Accounts Payable, they carry their end-of-period balances into the next accounting period |
| Temporary accounts | Also called nominal accounts |
| Temporary Accounts | Revenue and expense accounts, such as Revenues Earned and Wages Expense |
| Temporary Accounts | they begin each accounting period with a zero balance, accumulate a balance during the period, and are then cleared by means of closing entries |
| Closing entries | journal entries made at the end of an accounting period |
| Income Summary account | a temporary account that summarizes all revenues and expenses for the period |
| Income Summary account | only used in the closing process, never in the finanical statements |
| Post-closing trial balance | it contains only balance sheet accounts because the income statement accounts and the withdrawals account have been closed and now have zero balances |
| Post-closing trial balance | a final check that total debits equal total credits |
| Reversing entry | an optional journal entry made on the first day of an accounting period |
| Reversing Entry | has the opposite effect of an adjusting entry |
| Working papers | provide evidence of past work, enable accountants to retrace their steps when need to verify information in financial statements |
| Working papers | used to organize and avoid omitting important information |
| Work sheet | a special kind of working paper |
| Work sheet | is extremely useful when company prepares financial statments on both an annual and seasonal basis |
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