English Accounting 1 Lecture Notes

Comprehensive practice flashcards based on English Accounting 1 lecture notes, covering core concepts from accrual basis to journal entries.

What is the Accrual Basis?

Revenues and expenses are recognized when they are earned or incurred, regardless of cash being received or paid.

What is the Cash Basis?

Revenues and expenses are recognized when cash is received or paid.

What is accounting?

Accounting is the process of recording, classifying, summarizing, and reporting financial transactions.

What is the accounting equation?

$$Assets = Liabilities + Equity$$

What are assets?

Assets are resources owned or controlled by a company that provide future economic benefits.

What are liabilities?

Liabilities are obligations that a company owes to others.

What is equity?

Equity is the owner’s interest in the company’s assets after deducting liabilities.

What is revenue?

Revenue is income earned from the company’s main business activities.

What is an expense?

An expense is a cost incurred to generate revenue.

What is a debit?

Debit is the left side of an account and increases assets and expenses.

What is a credit?

Credit is the right side of an account and increases liabilities, equity, and revenue.

What is the difference between debit and credit?

Debit is the left side of an account, while credit is the right side.

What are the main financial statements?

The main financial statements are the Income Statement, Balance Sheet, Cash Flow Statement, and Statement of Changes in Equity.

What is the Income Statement?

The Income Statement shows revenues, expenses, and net income or loss for a specific period.

What is the Balance Sheet?

The Balance Sheet shows assets, liabilities, and equity at a specific date.

What is the Cash Flow Statement?

The Cash Flow Statement shows the cash inflows and outflows of a company.

What is gross profit?

Gross profit is sales minus cost of goods sold.

What is net profit?

Net profit is the profit remaining after deducting all expenses from revenue.

What is the difference between gross profit and net profit?

Gross profit is calculated after deducting COGS, while net profit is calculated after deducting all expenses.

What are Accounts Receivable?

Accounts Receivable is money owed to the company by its customers.

What are Accounts Payable?

Accounts Payable is money the company owes to its suppliers.

What is the difference between AR and AP?

AR is money owed to the company, while AP is money the company owes to others.

What is the difference between Periodic and Perpetual Inventory?

Periodic inventory is updated at the end of the period, while perpetual inventory is updated continuously.

What is FIFO?

FIFO means First-In, First-Out. It assumes the oldest inventory is sold first.

What is depreciation?

Depreciation is the systematic allocation of an asset’s cost over its useful life.

What is straight-line depreciation?

Straight-line depreciation allocates the same depreciation amount each year.

What is accumulated depreciation?

Accumulated depreciation is the total depreciation recorded for an asset since it was purchased.

What is book value?

$$Book\,Value = Cost - Accumulated\,Depreciation$$

What is a prepaid expense?

A prepaid expense is an expense paid in advance before it is incurred.

What is an accrued expense?

An accrued expense is an expense that has been incurred but not yet paid.

What is unearned revenue?

Unearned revenue is cash received before the company earns the revenue.

What is accrued revenue?

Accrued revenue is revenue earned but not yet received in cash.

What is a Trial Balance?

A Trial Balance is a list of ledger accounts used to check that total debits equal total credits.

What is bank reconciliation?

Bank reconciliation is the process of comparing company records with the bank statement and identifying differences.

What is internal control?

Internal control is a process designed to protect assets, prevent errors and fraud, and ensure accurate financial information.

What is segregation of duties?

Segregation of duties means dividing responsibilities among different employees to reduce the risk of errors and fraud.

What is Input VAT?

Input VAT is VAT paid on purchases and is generally recoverable.

What is Output VAT?

Output VAT is VAT collected from customers and is payable to the tax authority.

What is a journal entry?

A journal entry records a financial transaction using debits and credits.

A company purchased equipment for cash. What is the entry?

Dr. Equipment Cr. Cash

A company purchased supplies on credit. What is the entry?

Dr. Supplies Cr. Accounts Payable

A company paid a supplier. What is the entry?

Dr. Accounts Payable Cr. Cash

A company received cash from a customer. What is the entry?

Dr. Cash Cr. Accounts Receivable