Week 2 Accounting Information Systems and the Accounting Cycle - Vocabulary Flashcards

Vocabulary flashcards covering AIS, the accounting cycle, and core accounts/concepts from the notes.

Accounting Information System (AIS)

System used to collect and process transaction data and communicate financial information; outputs include the four financial statements; often computerized to handle recording steps.

Accounting Cycle

Eight-step process from recording transactions to preparing financial statements: chart of accounts, journal entries, general ledger, trial balance, adjusting entries, adjusted trial balance, financial statements, closing entries.

Chart of Accounts (CoA)

A structured list of all accounts used by a company, categorized as assets, liabilities, equity, revenues, and expenses, linking to the balance sheet or income statement.

Assets

Economic resources controlled by the company expected to provide future benefits (e.g., cash, accounts receivable, inventory).

Liabilities

Obligations the company owes to outsiders (e.g., accounts payable, bank loans).

Shareholders’ Equity

The owners’ claim on the company after liabilities are subtracted from assets; includes common shares and retained earnings.

Common Shares

Equity account representing ownership shares issued to investors.

Retained Earnings

Equity account representing cumulative profits kept in the business after dividends.

Revenues

Income earned from delivering goods or services; increases equity and has a normal credit balance.

Expenses

Costs incurred to earn revenues; decreases equity and has a normal debit balance.

Journal Entry

Record of a transaction in the general journal using debits and credits to keep the accounting equation in balance.

Double-entry Accounting

System where every transaction affects at least two accounts so total debits equal total credits.

Debit

Left side of an account; increases assets and expenses; decreases liabilities, equity, and revenues.

Credit

Right side of an account; increases liabilities, equity, and revenues; decreases assets and expenses.

Normal Balance

The usual side on which an account increases: assets and expenses are driven by debits; liabilities, equity, and revenues by credits.

T-account

A visual representation of an individual account with a left (debit) and right (credit) side used to analyze postings.

Trial Balance

A list of all accounts with their balances to verify that total debits equal total credits.

Adjusting Entries

End-of-period entries to accrue revenues and expenses and update estimates; not recorded in the normal daily journal.

Adjusted Trial Balance

Trial balance prepared after adjusting entries to support the preparation of financial statements.

General Ledger

The collection of all company accounts (the system of T-accounts) showing balances after postings.

Posting

Transferring journal entries to the appropriate general ledger accounts.

Accounts Payable

A liability representing amounts owed to suppliers.

Accounts Receivable

An asset representing amounts customers owe to the company.

Cash

An asset representing money on hand or in the bank.

Inventory

An asset representing goods held for sale.

Bank Loan

A liability representing borrowed funds from a bank.

Financial Statements

The primary reports (income statement, balance sheet, statement of cash flows, and statement of changes in equity) used to communicate financial performance and position.