Accounting Principles Chapter 4: Completing the Accounting Cycle: Chapter 4 Overview

These flashcards cover key concepts from Chapter 4 of Accounting Principles related to completing the accounting cycle.

Worksheet

A multiple-column form used in preparing financial statements.

Trial Balance

A summary of all the account balances, including debits and credits.

Adjustments

Entries made to account for items that have not yet been recorded.

Adjusted Trial Balance

A trial balance prepared after adjustments are made.

Income Statement

A financial statement that reports revenues and expenses over a specific period.

Balance Sheet

A financial statement that reports a company’s assets, liabilities, and equity at a specific point in time.

Closing Entries

Journal entries made at the end of an accounting period to transfer balances from temporary accounts to permanent accounts.

Net Income

The total revenue minus total expenses.

Temporary Accounts

Accounts that are closed at the end of the accounting period.

Permanent Accounts

Accounts that are not closed at the end of the accounting period.

Financial Statements

Reports that summarize the financial condition and operations of a business.

Post-Closing Trial Balance

A trial balance prepared after closing entries are made.

Owner's Equity Statement

A statement detailing the changes in the owner's equity account.

Accumulated Depreciation

The total amount of depreciation expense that has been recognized against an asset.

Service Revenue

Income earned from providing services to customers.

Interest Expense

The cost incurred by an entity for borrowed funds.

Salaries and Wages Payable

Liabilities reflecting amounts owed to employees for work done.

Unearned Revenue

Liabilities for services or products received but not yet earned.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life.

Adjusting Entries

Entries made at the end of an accounting period to update account balances.

Liabilities

Obligations of a company arising from past transactions.

Assets

Resources owned by a company that provide future economic benefits.

Classified Balance Sheet

A balance sheet that groups similar assets and liabilities.

Current Assets

Assets expected to be converted to cash or used up within one year.

Long-Term Investments

Investments in securities that are expected to be held for more than one year.

Intangible Assets

Assets that do not have physical substance.

Property, Plant, and Equipment

Long-lived assets used in operations.

Current Liabilities

Obligations a company expects to settle within one year.

Long-Term Liabilities

Obligations that are not expected to be settled within one year.

Reversing Entries

Entries made at the beginning of a new accounting period to reverse adjusting entries.

Correcting Entries

Entries made to correct errors in the accounting records.

Liquidity

The ability of a company to meet its short-term obligations.

Retained Earnings

The cumulative amount of net income that has been retained in the business.

Common Stock

Shares representing ownership in a company and the right to vote.

Interest Payable

Liabilities representing interest owed on borrowed funds.

Accounts Receivable

Amounts owed by customers for goods or services provided.

Owner's Capital

Owner's equity in a business after accounting for all assets and liabilities.

Cash Basis Accounting

Accounting method where revenue and expenses are recorded when cash is exchanged.

Accrual Basis Accounting

Accounting method where revenue and expenses are recorded when earned or incurred.

Debit and Credit

The two main types of entries used to record transactions in accounting.