basics & vocab for intermediate accounting i

element

type of account that goes on a financial statement

balance sheet elements

assets, liabilities, stockholders’ equity

income statement elements

revenue, expenses, gains, losses

statement of cash flows elements

all accounts from the income statement & balance sheet + operating, investing, financing activities

statement of stockholders’ equity elements

comprehensive income, investments to owners, distributions to owners, retained earnings

statement of comprehensive income elements

net income, other comprehensive income

accounting equation

assets = liabilities + stockholders’ equity

straight line depreciation formula

total cost - salvage value divided by years

the accounting system

to record, organize, summarize, & report useful information to external users (stakeholders) & internal users (managers)

financial accounting environment

relevant financial information is provided through related disclosure notes & financial statements

transaction

the transfer or exchange of resources between the company & another party

event

an occurrence that affects the company

arrangement

an agreement or a promise by the company with another party or entity

accounting cycle during the transaction period

source documents, transaction analysis, record in journal, post to ledger

accounting cycle at the end of the period

unadjusted trial balance, record & post AJE’s, adjusted trial balance, financial statements

accounting cycle at the end of the year

close temporary accounts, post-closing trial balance

accounts

a process by which a company stores the recorded monetary information from its transactions, events, & arrangements

historical cost

the most relevant and faithful representation of the value of the exchange at the time of most transactions

double-entry accounting system

for each transaction, event, or arrangement that a company records, the total amount of the debits must be equal to the total amount of the credits

perpetual inventory system

where the Inventory account is updated for each purchase or sale

deferrals

arise when cash flows occur prior to recognition of an item in income

accruals

arise when cash flows occur after recognition of an item in income

estimates

recognized amounts on the balance sheet and income statement that are not known with certainty and must be estimated

periodic inventory system

a process to record inventory purchases in a purchases account

cost of goods sold

the expenses involved in producing your goods over a certain period of time

cost of goods available for sale

the cost of finished inventory in hand at the beginning of the period

accrual accounting

a company recognizes revenues in the accounting period in which performance obligations to customers are satisfied

cash-basis accounting

a company records revenues when it collects cash from sales and records expenses when it pays cash for its operations

accumulated other comprehensive income (AOCI)

an account to measure and report the total amount of other comprehensive income (OCI) items

contributed capital

the amount of capital invested by owners

periodic accounts

an account to determine the changes in retained earnings that occur during a period, and the balances are not carried forward

permanent accounts

accounts with balances at the end of the period are carried forward to the next period

temporary accounts

an account to determine the changes in retained earnings that occur during a period, and the balances are not carried forward