Accounting 1 Final

Accounting

Planning, recording, analyzing, and interpreting financial information.

Accounting System

A planned process for providing financial information that will be useful to management.

Accounting Records

Organized summaries of a business' financial activities.

Service Business

A business that performs an activity for a fee.

Proprietorship

A business owned by one person.

Asset

Anything of value that is owned.

Equities

Financial rights to the assets of a business.

Liability

An amount owed by a business.

Owner's Equity

The amount remaining after the value of all liabilities is subtracted from the value of all assets.

Accounting Equation

An equation showing the relationship among assets, liabilities, and owner's equity.

Transaction

A business activity that changes assets, liabilities, or owner's equity.

Account

A record summarizing all the information pertaining to a single item in the accounting equation.

Account Title

The name given to an account.

Account Balance

The amount in an account.

Capital

The account used to summarize the owner's equity in a business.

Balance Sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

Revenue

An increase in owner's equity resulting from the operation of a business.

Sale On Account

A sale for which cash will be received at a later date.

Expense

A decrease in owner's equity resulting from the operation of a business.

Withdrawals

Assets taken out of a business for the owner's personal use.

T Account

An accounting device used to analyze transactions.

Debit

An amount recorded on the left side of a T account.

Credit

An amount recorded on the right side of a T account.

Normal Balance

The side of the account that is increased.

Chart of Accounts

A list of accounts used by a business.

Journal

A form for recording transactions in chronological order.

Journalizing

Recording transactions in a journal.

Entry

Information for each transaction recorded in a journal.

General Journal

A journal with two amount columns in which all kinds of entries can be recorded.

Double-Entry Accounting

The recording of debit and credit parts of a transaction.

Source Document

A business paper from which information is obtained for a journal entry.

Check

A business form ordering a bank to pay cash from a bank account.

Invoice

A form describing the goods or services sold, the quantity, and the price.

Sales Invoice

An invoice used as a source document for recording a sale on account.

Receipt

A business form giving written acknowledgement for cash received.

Memorandum

A form on which a brief message is written describing a transaction.

Ledger

A group of accounts.

General Ledger

A ledger that contains all accounts needed to prepare financial statements.

Account Number

The number assigned to an account.

File Maintenance

The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current.

Opening an Account

Writing an account title and number on the heading of an account.

Posting

Transferring information from a journal entry to a ledger account.

Proving Cash

Determining that the amount of cash agrees with the balance of the cash account in the accounting records.

Correcting Entry

A journal entry made to correct an error in the ledger.

Checking Account

A bank account from which payments can be ordered by a depositor.

Endorsement

A signature or stamp on the back of a check transferring ownership.

Blank Endorsement

An endorsement consisting only of the endorser's signature.

Special Endorsement

An endorsement indicating a new owner of a check.

Restrictive Endorsement

An endorsement restricting further transfer of a check's ownership.

Postdated Check

A check with a future date on it.

Bank Statement

A report of deposits, withdrawals, and bank balances sent to a depositor by a bank.

Dishonored Check

A check that a bank refuses to pay.

Electronic Funds Transfer

A computerized cash payments system that uses electronic pulses to transfer funds.

Debit Card

A bank card that, when making purchases, automatically deducts the amount of the purchase from the checking account of the cardholder.

Petty Cash

An amount of cash kept on hand and used for making small payments.

Petty Cash Slip

A form showing proof of a petty cash payment.

Fiscal Period

The length of time for which a business summarizes and reports financial information.

Work Sheet

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.

Trial Balance

A proof of the equality of debits and credits in a general ledger.

Adjustments

Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period.

Income Statement

A financial statement showing the revenue and expenses for a fiscal period.

Net Income

The difference between total revenue and total expenses when total revenue is greater.

Net Loss

The difference between total revenue and total expenses when total expenses is greater.

Component Percentage

The percentage relationship between one financial statement item and the total that includes that item.

Adjusting Entries

Journal entries recorded to update general ledger accounts at the end of a fiscal period.

Permanent Accounts

Accounts used to accumulate information from one fiscal period to the next.

Temporary Accounts

Accounts used to accumulate information until it is transferred to the owner's capital account.

Closing Entries

Journal entries used to prepare temporary accounts for a new fiscal period.

Post-Closing Entries

A trial balance prepared after the closing entries are posted.

Accounting Cycle

The series of accounting activities included in recording financial information for a fiscal period.

Accounting Period Cycle

Changes in financial information are reported for a specific period of time in the form of financial statements.

Adequate Disclosure

Financial statements contain all information necessary to understand a business' financial condition.

Business Entity

Financial information is recorded and reported separately from the owner's personal financial information.

Consistent Reporting

The same accounting procedures are followed in the same way in each accounting period.

Going Concern

Financial statements are prepared with the expectation that a business will remain in operation indefinitely.

Matching Expenses with Revenue

Revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period.

Objective Evidence

A source document is prepared for each transaction.

Unit of Measure

Business Transactions are stated in numbers that have common values; that is, using a common unit of measure.