Accounting Flashcards

Flashcards for reviewing accounting lecture notes.

Sole Proprietorship

Business owned by one individual; the simplest form of business organization.

Partnership

Business owned by two or more people who agree to contribute resources and divide profits.

Corporation

Business owned by shareholders and managed by a Board of Directors; a separate legal entity.

Service Business

Businesses engaged in providing services.

Merchandising Business

Businesses engaged in buying and selling goods.

Manufacturing Business

Businesses that create or manufacture their own products.

Accounting

The art of identifying, recording, classifying, and summarizing financial transactions and events.

Recording (in Accounting)

Recording and tracking business transactions chronologically.

Classifying (in Accounting)

Sorting recorded transactions into categories like assets, liabilities, and owner’s equity.

Summarizing (in Accounting)

Summarizing processed information to make meaningful reports.

Interpreting (in Accounting)

Analyzing and interpreting summarized information to make decisions.

Income Statement

A report summarizing a business's income and expenses for a period of time.

Statement of Changes in Owner’s Equity

A statement that shows the changes in equity components over a reporting period.

Statement of Financial Position

A summary of a business's assets, liabilities, and owner’s equity as of a certain date.

Statement of Cash Flows

A summary of the cash inflows and outflows of a business for a period of time.

Assets

Resources controlled by the enterprise as a result of past events, from which future economic benefits are expected.

Current Assets

Assets held for trading or expected to be realized within the normal operating cycle.

Cash on Hand

Cash items available for use in current operations.

Cash in Bank

Money deposited in the bank.

Accounts Receivable

Accounts for uncollected revenues from customers.

Inventory

Goods the enterprise has on hand for sale or use in production.

Office Supplies

Items or materials used for administrative purposes.

Notes Receivable

An asset held by the business with a promissory note.

Loan Receivable

Funds that have been lent by the business but not yet repaid.

Non-current Assets

Long-term assets not meant to be converted into cash after one year.

Property, Plant, and Equipment (PPE)

Tangible assets with an estimated useful life beyond one year.

Intangible Assets

Assets that do not have physical substance but have value.

Liabilities

Present obligation of an enterprise arising from past events, expected to result in an outflow of resources.

Current Liabilities

Liabilities to be settled within the normal operating cycle or within 12 months.

Accounts Payable

Amount owed to a creditor, usually arising from the purchase of goods.

Salaries Payable

Amount owed to employees.

Notes Payable

Amount owed to a creditor with a written promissory note.

Loan Payable

The amount owed to a creditor as a result of borrowing money.

Unearned Revenue

Money received from customers for goods or services that haven’t been delivered yet.

Other Payables

Other obligations that must be settled within a year.

Non-current Liabilities

Obligations to be settled beyond one year.

Long-term Lease

Rental agreements that typically last several years.

Mortgage Payable

Liability secured by a mortgage.

Owner’s Equity / Capital

Amount invested in a business by the owner; excess of a company’s assets over its liabilities.

Capital (Accounting)

Owner’s investment in the business.

Drawings

Withdrawals of assets by the owner for personal use.

Income and Expense Summary

A temporary account used to summarize the effects of income and expenses on the capital account.

Income

Also known as revenue, sales, fees, or gain; increases in economic benefits.

Sales

Account used in a business of merchandising and manufacturing.

Service Income

Account used in a service business; reflects the gross earnings before subtracting expenses.

Other Income

Income earned which is not directly related to the main operations of the business.

Net Income

A positive result wherein income exceeds expenses.

Net Loss

A negative result wherein expenses exceed income.

Expenses

Decreases in economic benefits by expensing assets or recognizing liabilities.

Salaries Expense

The cost of services rendered by employees.

Supplies Expense

The cost of office supplies used in the business.

Rent Expense

The cost of renting space for business operations.

Miscellaneous Expense

Other costs normally incurred in relation to the operation of the business.

Accounting Equation

A principle that a company’s assets should equal its liabilities plus equity.

Double-Entry System

Each transaction affects at least two items in the accounting records.

Journalizing

The process of recording business transactions in the journal in chronological order.

Journalizing as First Step

The first step in the accounting cycle after analyzing a transaction.

Purpose of Journalizing

Ensures that each financial event is accurately documented.

General Journal

Used for all types of transactions, especially those that don't fit into specialized journals.

Simple Journal Entry

Single-entry transaction (1 debit, 1 credit).

Compound Journal Entry

Multiple-entry transaction (2 or more debits/credits).

Special Journals

Used for repetitive transactions like credit sales.

Posting

The process of transferring information from the journal to the ledger.

Ledger

The group of accounts used by the company.

General Ledger

Contains all the accounts reported in the financial statements.

Contra Accounts

Accounts to record deductions from related accounts with positive balances.

Adjunct Accounts

Accounts set up to record additions to related accounts.

Subsidiary Ledger

Contains details of some general ledger account balances.

Control Account

A general account that has a supporting subsidiary ledger.

Balance Sheet Accounts (Real Accounts)

Represents assets, liabilities, and owner’s equity.

Income Statement Accounts (Nominal Accounts)

Represents revenue and expenses.

Chart of Accounts

A list of all account titles used by the company.

Step 1 in Posting

Copy the date of the transaction to the ledger from the journal.

Step 2 in Posting

Copy the page number of the journal under the J.R. column of the ledger.

Step 3 in Posting

Transfer the debit/credit amount from the journal to the ledger under the debit/credit column.

Step 4 in Posting

Write the account number in the P.R. column of the journal after posting to the ledger.

Trial Balance

A schedule of all balances to prove the equality of debits and credits.

Unadjusted Trial Balance

A list of accounts with their balances before any adjusting entries are made.

Step 1 in Preparing an Unadjusted Trial Balance

Make a listing of all account titles in their proper numerical order.

Step 2 in Preparing an Unadjusted Trial Balance

Get the account balance of each ledger account and write it under its corresponding debit or credit column.

Step 3 in Preparing an Unadjusted Trial Balance

Add the debit and the credit columns of the trial balance.

Step 4 in Preparing an Unadjusted Trial Balance

Check whether the debit totals and credit totals are equal.

Transposition Error

Occurs when the order of two numbers is reversed.

Transplacement (Slide) Error

Occurs when a decimal point has been moved or misplaced.

Service Operations

Engaged in the rendering of services.

Merchandising Operations

Engaged in buying and selling of goods.

Manufacturing Operations

Business creating/manufacturing their own products.

Assets

Financial resources owned by the business

Liabilities

Financial obligations (debts) of the business

Owner's Equity

The owner's stake in the business

Income

Increases the financial health of a business

Expenses

Decrease the financial health of a business

Statement of Earnings/Statement of Profit or Loss

Another name for Income Statement

Balance Sheet

Another name for Statement of Financial Position

Sales Journal

Used for credit sales

Purchases Journal

Used for credit purchases

Cash Reciepts Journal

Used to record all cash coming in

Cash Disbursements Journal

Used to record all payments going out

Recording

Recording and keeping track of transations chronologically in books.

Classifying

Recorded tansactions sorted into categories.