AGEC 340 - Chapter 9 Practice Flashcards

Traditional vocabulary-style flashcards covering the key components of financial information systems, accounting processes, and specific line items for financial statements based on Chapter 9.

Profit

The amount remaining from a sale after the cost of the product, operating expenses, and interest have been paid.

Managerial Accounting

The collection and use of financial information to make management decisions.

Financial Accounting

The collection and use of financial information to meet outside reporting requirements.

Journal

A record for recording day-to-day transactions in chronological order.

Ledger Accounts

Accounts that allow related transactions or activities to be separated, categorized, and recorded.

Accounting Period

A predetermined regular basis in which ledger accounts are summarized.

Balance Sheet

A document representing the financial condition as of a specific time, following the equation $Assets = Liabilities + Owner’s Equity$.

Assets

What the business owns.

Current Assets

Cash/checking or assets that will be converted to cash during a normal operating cycle of the business, such as accounts receivable, inventory, and prepaid expenses.

Fixed Assets

Items that the business owns that have a relatively long life, including equipment (less accumulated depreciation), land, and buildings.

Liabilities

What the business owes to outsiders.

Current Liabilities

Outsiders’ claims against the business that will fall due within a normal operating cycle (usually 1 year), such as accounts payable, notes payable, and accrued expenses.

Long-term Liabilities

Outsiders’ claims against the business that will fall due beyond one year, such as mortgages, bonded indebtedness, and long-term loans.

Owner’s Equity (Net Worth)

What the owners have invested in the business, representing the claims of the owners against the business’ assets.

Income Statement

A summary of revenue and expenses during a specific period of time that reports profit or loss; also known as an operating statement or profit and loss statement.

Expenditure

Incurred when the business acquires an asset.

Expenses

Expenditures that are incurred during the accounting period being reported, which directly affect owner’s equity.

Cash-basis approach

An accounting method where revenue and expenses occur only when cash is received or paid.

Accrual-basis approach

An accounting method where revenues and expenses exist whenever they are earned or incurred regardless of when the cash transaction occurs.

Net Sales

The dollar value of all products and services sold, calculated as $\text{Gross sales} - ext{Returns} - ext{Discounts and allowances}$.} {