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12 terms

Accounting 3+4

STUDY
PLAY
event
A happening of consequence. Generally is the source or cause of changes in assets, liabilities and equity. May be external or internal
Transaction
An external event involving a transfer or exchange between two or more entities
Account
A systematic arrangement that shows the effect of transactions and other events. Companies keep seperate for each asset, liability, revenue and expense and for capital.
Real and nominal Accounts
Real (Permanant) accounts are asset, liability and equity accounts; they appear on the balance sheet. Nominal (temporary) accounts are revenue, expense and dividend accounts; except for dividends, they appear on the income statement. Companies periodically nominal accounts but dont close real accounts
Ledger
The book containing the accounts
Journal
The book of original entry where the company initially records transactions
Posting
The process of transferring the essential facts and figures from the book of original entry to the ledger accounts
Trial Balance
The list of all open accounts in the ledger and their balances taken immediately after all adjustments have been posted is called an adjusted trial balance.
Adjusting Entries
Entries made at the end of an accounting period to bring all accounts up to date on an accrual basis
Accrual Basis
A method of accounting in which each item is entered as it is earned or incurred regardless of when actual payments are received or made
Financial Statements
Includes balance sheet, income statement, statement of cash flow and statement of retained earnings
Closing Entries
Formal process by which the enterprise reduces all nominal accounts