Term
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Definition
| an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities to interested users. |
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Term
| External (financial) information *Financial Accounting* |
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Definition
| providing info outside the business (i.e. financial statements, income statements, statement of retained earnings, balance sheet, and statement of cash flows) |
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Term
| Internal (financial) Information *Managerial Accounting* |
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Definition
| any financial information needed by management (i.e. budgets, unit cast, cost analysis, forecasting) |
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Term
| Professional “specialists” |
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Definition
| CPA –Certified Public Accountant |
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Term
| Financial Statements are prepared using what? |
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Definition
| GAAP (Generally Accepted Accounting Principles and Assumptions. They are composed of revenues and expenses. |
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Term
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Definition
| revenues –expenses=net income (credit net cash) |
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Term
| Generally Accepted Accounting Principles (GAAP) |
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Definition
| the standards practiced by accountants in recording and reporting economic events. These standards were developed using certain basic assumptions. |
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Definition
| Record assets at cost-implies cash price. Sometimes called the historical cost principle |
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Term
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Definition
| Information is based on unbiased and measurable evidence. |
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Definition
| Business will continue to operate indefinitely |
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Term
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Definition
| Transactions with the U.S. $1; assuming that the dollar is stable (inflation) |
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Term
| Revenue Recognition Principle |
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Definition
| Recognize revenue when earned |
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Term
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Definition
| Match expenses with revenue |
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Term
| Full Disclosure Principle |
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Definition
| Disclose enough information so that users can make financial decisions |
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Term
| Business Entity Assumption |
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Definition
| Provide information about the company, not about the employees or owners |
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Term
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Definition
-Sole Proprietorship
-Partnership
-Corporation |
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Term
| specific accounting principles |
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Definition
| Usually created by a pronouncement from an authoritative body |
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Term
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Definition
| Financial statements reflect the assumption that the business continues operation. |
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Term
| GAAP (Generally Accepted Accounting Principles) |
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Definition
| Derived from long-used and generally accepted accounting practices. |
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Term
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Definition
| Every business is accounted for separately from its owner(s). |
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Term
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Definition
| Revenue is recorded only when the earnings process is complete. |
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Term
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Definition
| Information is based on actual costs incurred in transactions. |
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Term
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Definition
| A company reports details behind financial statements that would impact user’s decisions. |
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Term
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Definition
| A company records the expenses incurred to generate the revenues recorded. |
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Term
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Definition
| Assets=Liabilities + Equity |
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Term
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Definition
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Term
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Definition
| obligations or creditor’s claims on Assets |
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Term
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Definition
| Residual Interest or net Assets( A-L=E) or owner’s claims on Assets |
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Term
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Definition
1) Contributed capital (common stock)
2) Retained earnings: earnings retained by business; net income not distributed to owners as dividends |
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Term
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Definition
| Revenues –Expenses – Dividends |
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Term
| Expanded Accounting Equation |
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Definition
| Assets= Liabilities+Common Stock+Revenues-Expenses-Dividends |
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Term
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Definition
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Term
| Perpetual Inventory System |
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Definition
| Inventory accounts as you buy and sell inventory; also records cost of merchandise sold when inventory is sold |
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Term
| Journal Entry for Purchase of Inventory |
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Definition
Inventory XX
Accounts Payable XX |
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Term
| Journal Entry for the Sale of Inventory |
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Definition
Accounts Receivable XX
Sales XX
Cost of Goods Sold XX
Inventory XX |
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Term
| Periodic Inventory System |
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Definition
| Updates accounting records (inventory and cost of merchandise sold) at the end of the period –after a physical count of the inventory |
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Term
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Definition
Reduction of price if paid within a discount period
Ex: 2/10, n/30: 2% discount if paid within 10 days, otherwise in 30 days |
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Term
| Journal Entry for Purchase Discount Paid within Discount Period |
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Definition
Accounts Payable XXX
Cash XXX
Inventory XXX |
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Term
| Journal Entry for Sales Discount Received within Discount Period |
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Definition
Cash XXX
Sales Discount XXX
Accounts Receivable XXX |
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Term
| Journal Entry for Purchase Return |
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Definition
Accounts Payable XXX
Inventory XXX |
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Term
| Purchase Allowances Journal Entry |
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Definition
Accounts Payable XXX
Inventory XXX |
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Term
| Sales Return Journal Entry |
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Definition
Sales Return
A/R
Inventory
C.O.G.S |
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Term
| Sales Allowances Journal Entry |
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Definition
Sales Allowances
Accounts Receivable |
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Term
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Definition
| Inventory Cost and F.O.B. Shipping Point |
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Term
| Journal Entry when Buyer Pays for Shipping |
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Definition
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Term
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Definition
| selling expense and F.O.B. Destination |
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Term
| Journal entry when seller pays for shipping |
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Definition
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Term
| Journal Entry for Depreciation |
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Definition
Depreciation Exp.
Accumulated depreciation |
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Term
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Definition
| Allocating cost of plant asset or equipment over their useful life |
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Term
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Definition
| Revenue earned that have not been received or recorded. Service revenue or rent revenue |
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Term
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Definition
| Revenue earned that have not been received or recorded. Service revenue or rent revenue |
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Term
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Definition
| Expense incurred in a period that is unpaid and unrecorded (i.e: salaries, interest, rent) |
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Term
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Definition
| Liability until earned (service or product provided) cash received in advance. |
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Term
| Prepaid (deferred) Expense |
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Definition
| are assets until used. Items paid in advance before receiving benefits (i.e: prepaid insurance or prepaid rent) |
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Term
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Definition
Date
Account Impacted
The amount
Increase or Decrease in Account |
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Term
| Asset accounts have a _____ increase, ______ decrease, and a _______ normal balance |
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Definition
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Term
| Liability accounts have a ____ increase, ____ decrease, and a _____ normal balance. |
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Definition
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Term
| Common Stock accounts have a ____ increase, ____ decrease, and a _____ normal balance. |
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Definition
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Term
| Revenue accounts have a ____ increase, ____ decrease, and a _____ normal balance. |
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Definition
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Term
| Expense accounts have a ____ increase, ____ decrease, and a _____ normal balance. |
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Definition
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Term
| Dividends accounts have a ____ increase, ____ decrease, and a _____ normal balance. |
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Definition
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