ACCTG 101, CHAPTER 2 : ACCOUNTING EQUATION AND DOUBLE-ENTRY SYSTEM

People

competent end users working to increase productivity

Procedures

manuals and guidelines that instruct end users on how to use software and hardware

Software

another name for programs, instructions that tell computer how to process data

System Software

background software that helps computer manage its internal resources

Application Software

performs useful work on general-purpose problems

Browsers

navigate, explore, and find info on internet

Word Processor

prepare written documents

Spreadsheet

analyze and summarize numerical data

Database Management System

organize and manage data and info

Presentation Graphics

communicate message or persuade other people

Multimedia

integrate video, music, voice, and graphics

Web Publishers

create interactive multi-media web pages

Graphics Program

create professional publications, draw, edit, modify

Virtual Reality

3D virtual or simulated environments

Artificial Intelligence

simulated human thought processes and actions

Project Managers

plan projects, schedule, people, and control resources

Hardware

consists of input devices, system unit, secondary storage, output devices, and communication devices

Input Devices

translate data and programs that humans can understand; keyboard, mouse, scanner, digital camera, and mic

System Unit

consists of electronic circuity

Central Processing Unit (CPU)

controls and manipulates data to produce information

Memory (Primary Storage)

temporarily holds data, program instructions, and processed data

Secondary Storage

stores data and programs; flashdrive, hard disk, and optical disk

Output Devices

processed information from CPU; monitor and printer

Communications Devices

send and receive data and programs

Data

raw material for data processing; consists of numbers, letters, and symbols

File

collection of characters organized as single unit

Accounting Information System

combination of personnel, records, and procedures that business uses to meet financial info

Manual System

A type of accounting information system - utilize paper-based journals and ledgers

Computer-Based Transaction System

A type of accounting information system - accounting data separate from other operating data

Stand-alone Module

simple accounting package with one module

Suite

accounting package with several modules

Database System

A type of accounting information system - enterprise resource planning depart from accounting equation method of organizing data, capture data both financial and non-financial and store info in data warehouse

Input-Processing-Output

processing of raw data into useful accounting info then finally into summarized reports follows the usual _____

assets, liabilities, and equity

relate to a reporting entity’s financial position

income and expenses

relate to a reporting entity’s financial performance

Asset

present economic resource controlled by entity as a result of past events, which has the potential to produce economic benefits

Liability

present obligation of entity to transfer economic resource

Equity

residual interest in the assets after deducting liabilities

Income

increase in assets and decrease in liability

Expenses

decrease in assets and increase in liabilities

Assets = Liabilities + Equity

Accounting equation

debited, credited

An account is ___ if entered on left while ____ if entered on right

debere

debit comes from latin word ____

credere

credit comes from latin word ____

Normal Balance

any account refers to the side of account where increases are recorded

Accounting Event

economic occurence that causes changes in an enterprise’s assets, liabilities, and/or equity

Transaction

particular kind of event that involves transfer of something of value between two entities

Source of Assets (SA)

A kind of types and effects of transaction - asset up & liabilities/equity up; buying of supplies on account

Exchange of Assets (EA)

A kind of types and effects of transaction - one asset up & another asset up; acquired equipment for cash

Use of Assets (UA)

A kind of types and effects of transaction - asset down & liabilities/equity down; settled accounts payable

Exchange of Claims (EC)

A kind of types and effects of transaction - one liability/equity up & another liability/equity down; received utilities bill but did not pay

Cash

A type of current asset - medium of exchange that’s accepted in bank deposits

Cash Equivalents

A type of current asset - short term, liquid investment = convert to cash

Notes Receivable

A type of current asset - written pledge of customer for future pay

Accounts Receivable

A type of current asset - sales of services/goods from customers on credit

Inventories

A type of current asset - assets for sale, production process, & to be consumed

assets, withdrawals, and expenses

Accounts where debit is their normal balance

liability, equity, and income

Accounts where credit is their normal balance

Prepaid Expenses

A type of current asset - paid in advance, business avoiding future cash pay

Property, Plant, and Equipment

A type of non-current asset - tangible assets of enterprise for production use, rental, or administrative purposes; land, building, machinery, and equipments

Accumulated Depreciation

A type of non-current asset - contra account consisting of sum of periodic depreciation charges

Intangible Assets

A type of non-current asset - identifiable, nonmonetary assets for production use, rental, or administrative purposes; goodwill, patents, licenses

Accounts Payable

A type of current liabilities - acceptance of goods/services = pay in future

Notes Payable

A type of current liabilities - business entity is the maker for promising payment on particular date

Accrued Liabilities

A type of current liabilities - amounts owed to others like salaries, utilities, interest, & taxes payable

Unearned Revenues

A type of current liabilities - business entity receives payment before rendering goods/services

Current Portion of Long-Term Debt

A type of current liabilities - mortgage notes, bonds, & other indebtedness to be in a year

Mortgage Payable

A type of non-current liabilities - long-term debt for certain assets to secure from creditor; payments = not made = creditor sell mortgaged asset

Bonds Payable

A type of non-current liabilities - business = money from lenders for asset acquisitions; funds from bonds, which is a contract indicating repayment & interest terms

Capital

A type of owner’s equity - record original & additional investments; increased by profit, decreased by loss; withdrawals = reduced

Withdrawals

A type of owner’s equity - has own account title where accounts are recorded

Income Summary

A type of owner’s equity - temporary account at the end of accounting period for income and expenses closing

Service Income

A type of income - revenues earned by services; accounting services by CPA firm

Sales

A type of income - revenues earned by merchandise sell; sale of building

Cost of Sales

A type of expenses - purchase costs/produce the products; cost of goods sold

Salaries/Wages Expenses

A type of expenses - all payments by employer to employee like salaries

Telecommunications, Electricity, Fuel, and Water Expenses

A type of expenses - all payments to telecommunications, electricity, fuel, and water

Rent Expense

A type of expenses - space, equipment, other asset rentals

Supplies Expense

A type of expenses - using of supplies

Insurance Expense

A type of expenses - insurance coverage paid like motor, vehicles, health

Depreciation Expense

A type of expenses - cost of tangible assets allocated/charged

Uncollectible Accounts Expense

A type of expenses - receivables estimated unsure of collection

Interest Expense

A type of expenses - borrowed funds