Integrated Accounting Fundamentals: Identifying and Analyzing Transactions

These flashcards cover fundamental accounting concepts including bookkeeping methods, the five major accounts, the accounting equation, the accounting cycle, and various source documents from the first term of AY 26-27.

Accounting Information System

The means by which a reporting entity records and stores the financial and managerial information from its transactions or economic events so that it can retrieve and report the information in an accounting statement.

Single-entry accounting

A method of tracking a company’s assets, liabilities, income, and expenses by recording each transaction one single time, typically adopted by organizations with few transactions or small business enterprises.

Bookkeeping

The systematic and chronological recording of transactions and events in books of account, also known as the recording phase of accounting.

Double-entry bookkeeping

A system which views a transaction as having a two-fold effect (a value received and a value parted with) and reflects these effects in the accounting record based on the concepts of duality and equilibrium.

Account

The basic storage of information in accounting that records the increases and decreases in a specific item of asset, liability, equity, income, or expense.

Chart of accounts

A list of all the accounts used by a business.

Contra accounts

Accounts presented in the financial statements as a deduction to their related accounts.

Adjunct accounts

Accounts presented in the financial statements as an addition to their related accounts.

Suspense account

A general ledger account in which amounts are temporarily recorded when the appropriate account cannot be determined at the time of the transaction.

Real/Permanent accounts

Accounts that have running balances, meaning the balances continually add up.

Nominal/Temporary accounts

Accounts that do not keep a running balance and are zeroed out at the end of each accounting period.

Assets

A present economic resource controlled by the entity as a result of past events.

Liabilities

A present obligation of the entity to transfer an economic resource as a result of past events.

Equity

The residual interest calculated as assets minus liabilities.

Income

Increases in economic benefits during the period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to investments by owners.

Expenses

Decreases in economic benefits during the period in the form of outflows or depletions of assets or increases of liabilities that result in decreases in equity, other than those relating to distributions to owners.

Accounting Equation

The fundamental relationship representing the dual effect of transactions, expressed as: $Assets = Liabilities + Capital$

Journal

Known as the "book of original entries," it is the accounting record where business transactions are first recorded.

Special Journal

A journal used to record transactions of a similar nature, such as sales journals, purchases journals, cash receipts journals, and cash disbursements journals.

Ledger

Known as the "book of final entries," it is used to classify the effects of business transactions on the accounts.

Subsidiary ledger

Provides a detailed breakdown of the balances of controlling accounts.

Debit (DR)

Derived from the Latin word 'debere' (to owe), it refers to the left side of an account and records incoming money or value received.

Credit (CR)

Derived from the Latin word 'credere' (to entrust), it refers to the right side of an account and records outgoing money or value parted with.

Accounting Cycle

A multistep process used by businesses—including identifying, journalizing, posting, and adjusting—to create an accurate record of their financial position.

Source Documents

Original records of business transactions that serve as evidence of details and proof that a transaction occurred.

Credit Note

A document issued by the seller that states the amount to be reduced from a previously issued invoice, often due to overcharging or returns.

Debit Note

A document that states an amount to be added to a previously issued invoice, such as for undercharging or interest on late payments.

Petty Cash Voucher

An internal document used for tracking small payments made from the petty cash fund.