ACC101 Accounting Terms to Memorize

BYU-I ACC101 course w/ Jason Johnson

Account Types & Normal Balances

Asset (debit balance)

Liability (credit balance

Equity (credit balance

Revenue (credit balance)

Expense (debit balance)

Accounting formula

Assets = Liabilities + Owners Equity

Accounting Rule #2

Debits (DR) = Credits (CR) on Journal Entries

Asset

1)      Future economic benefit 

2)      Arise from a past transaction

3) Controlled by the entity

Book Value

Asset – Contra Asset

Closing Entries

R.E.I.D.  Revenue, expenses, income summary, drawings

Credit (CR)

Right-hand entry

Debit (DR)

Left-hand entry

Expense

Outflow of economic resources

F.O.B. (Free on Board)

States when ownership and responsibility changes hands

GAAP

Generally Accepted Accounting Principles

Gross Profit

Revenue – Cost of Goods Sold (COGS)

Historical Cost Concept

Asset recorded at what was paid

Liability

1)      Future economic harm/disadvantage 

2)      Arise from a past transaction or event

3) Responsibility of the entity

Matching Principle

Record expenses when it helps me generate revenue

Materiality

Significant enough to have an impact on any decision

Names of Financial Statements

Income Statement, Statement of Owners

Equity, Balance Sheet, Statement of Cash Flow

Net Income

Revenue - Expenses

Owner Equity

Owners claim upon the business (A-L)

Purpose of Accounting

To provide information to decision makers

Revenue

Inflow of economic resources

Revenue Recognition Principle

Record revenue when goods or services are delivered

Entity Principle

Everything is recorded from the perspective of the business, not the owner.