ACC221 Exam 1

double entry accounting

for every event or transaction, we enter it in 2 places in out accounting system

balance sheet

a report that shows that stuff=claims to stuff

created at end of accounting period

assets

physical stuff

liabilities

claims of non owners

owners equity

claims of owners

accounting equation

assets=liabilities+owners equity

note payable

loan from a non owner to the organization

normal balance

t-account is the positive side

trial balance

report that lists each account in the accounting system

general ledger

list of all the accounts in the accounting system

inventory

goods for sale (asset)

equipment

items that are used in the business that last greater than one year (asset)

common stock

when owners invest in businessg

general journal

step in the accounting cycle where transactions are recorded in chronological date order

journal entry

show all the debits and credits of one transaction

accrual basis

record events and transactions in the period when they happen, not neccesarily when cash is received or paid

accounts receivable

promis of customer to pay in near future

interest payable

represents amounts owed to bank for interest on a loan

retained earnings

owners claim to asset account due to operation of the business

adjusting entries

are journal entries that not the result of an event, but instead are due to the passage of time

cost of goods sold

expense account

cost the company previously paid for the inventory just sold

wages expense

wages owed or paid to workers

rent expense

rent owed or paid for our building in the busines

interest expense

interest owed or paid on our bank loan

gross profit

sales revenue - cost of goods sold

total expenses

sum of all expenses except cost of goods soldq

net income

gross profit - total expenses

temporary accounts

revenue and expense account

close at end of every accounting period

permanent accounts

all asset, liability, and equity accounts

never closed

post closing trial balance

report to show accounting system in balance after closing entries

dividends

paying out profit to owners

dividends payable

amounts the company owes for dividends

liability account

accounts payable

amounts we owe to vendors (our promise to pay in the future when we buy on credit or account)