55 terms
Accounting Exam 2012
GAAP
generally accepted accounting principles
=standard accounting rules, guidelines and practices
=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
=Current Assets (easy)/Current Liabilities : 1
Equity Ratio
relationship between owner's equity and total assets
=Owner's Equity/Total Assetsx100%
=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
-->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
-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
% 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
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
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%