ACG5005 – Exam 1 SIMPLE

1. Accounts Payable — Money you OWE to suppliers. (You bought, haven't paid.)

2. Accounts Receivable — Money owed TO you by customers. (You sold, haven't

collected.)

3. Adjusting Entries — End-of-period bookkeeping updates. Never touch cash.

4. Assets — Economic resources that produce future revenue.

5. Audit — Independent examination of accounting records to verify accuracy.

6. Balance Sheet — Snapshot of assets, liabilities, and equity on a specific date. (Assets =

Liabilities + Equity)

7. Book Value — What an asset is worth on the books. (Original cost − Accumulated

depreciation)

8. Capitalize It — Record a cost as an asset on the balance sheet instead of expensing it

now.

9. Cash Flow Statement — Shows how cash was obtained and used. Three buckets:

Operating, Investing, Financing.

10. Channel Stuffing — Shipping more product than ordered to inflate sales, then taking

returns next period.

11. Closing — Zeroing out temporary accounts (Revenue, Expenses, Dividends) into

Retained Earnings at period end.

12. Common Stock — Certificates of ownership in a company. No special claim on assets

or dividends.

13. Conservatism — When uncertain, record the lower income. Delay revenue, accelerate

expenses.

14. Cost Flow Assumptions — Methods to assign costs to inventory when prices change.

(FIFO, LIFO, Weighted Average, Specific ID)

15. Cost of Goods Sold (COGS) — Total cost of inventory actually sold during the period.

16. Dividend — Wealth transferred from the business to its owners. Not an expense.

17. Double Entry — Every transaction has two sides — a debit and a credit. Always

balanced.

18. Earnings — Revenue minus Expenses. Also called net income or profit.

19. Earnings Management — Manipulating accounting numbers to hit a desired result. (Ex:

channel stuffing, delaying expenses)

20. Expense It — Record a cost immediately on the income statement instead of

capitalizing it.

21. Expenses — Economic sacrifices (assets decrease or liabilities increase) made to

generate revenue.

22. Financing Activities — Cash from/to investors and creditors. (Issuing stock, borrowing,

paying dividends)

23. Gains — Asset increases from incidental/peripheral transactions. Not from core

operations.

24. General Journal — Book of original entry. Chronological record of every transaction.

25. General Ledger — The complete set of all accounts used, organized in financial

statement order.

26. Income — Value created by providing goods/services through resource transformation.

27. Income Statement — Reports revenues minus expenses over a period. Shows profit or

loss.

28. Inflation — General rise in price levels over time. Affects FIFO vs. LIFO income

differently.

29. Interest — Fee paid to use someone else's money. Expense to borrower, revenue to

lender.

30. Internal Controls — Policies to reduce fraud and ensure reliable records.

31. Inventory — Goods purchased for resale. Carried as an asset until sold.

32. Investing Activities — Cash from buying/selling long-term assets or making/collecting

loans.

33. Liability — Obligation to give up assets or provide services in the future.

34. Liquidity — How quickly an asset can be converted to cash.

35. Losses — Asset decreases from incidental/peripheral transactions. Not from core

operations.

36. Lower-of-Cost-or-Market Rule — Report inventory at cost or market value, whichever

is lower. Never written back up.

37. Matching Concept — Record expenses in the same period as the revenues they

helped generate.

38. Materiality — Information is material if knowing it would change a user's decision.

39. Net Income — Revenue minus Expenses. The bottom line. Increases equity.

40. Operating Activities — Cash from day-to-day business. Revenue in, expenses out.

Includes interest.

41. Payables — What you owe. (Accounts payable = suppliers. Notes payable = formal

debt.)

42. Prepaid Expense — Cash paid before the benefit is received. Asset now, expense later.

(Ex: prepaid insurance)

43. Product Costs — All costs to acquire and ready inventory for sale. (Includes freight-in)

44. Receivables — What customers owe you. (Ex: Accounts Receivable)

45. Retained Earnings — Cumulative earnings kept in the business since inception. (All

revenue − expenses − dividends, ever.)

46. Revenue — Economic benefit earned by providing goods or services. (Assets ↑ or

Liabilities ↓)

47. Selling & Administrative Costs — Costs NOT traceable to inventory. Expensed when

incurred. (Ex: advertising, rent)

48. Separation of Duties — The person who controls an asset cannot be the same person

who records it.

49. Shrinkage — Inventory lost for reasons other than sales. (theft, damage, loss)

50. Specific Identification — Track the actual cost of each specific item sold.

51. Transaction — A business event that transfers value between two entities.

52. Unearned Revenue — Cash collected before service is performed. A liability until

earned.

53.

"Write it Down"

— When market value drops below cost, reduce the asset's recorded

value. Never reversed.