The Accounting Cycle

Flashcards covering key terms and definitions related to the accounting cycle.

Accounting Cycle

The collective process of recording and processing the accounting activities of a company.

Assets

Resources owned by a company that have economic value.

Accounts Receivable (AR)

Money owed to a company by customers for goods or services delivered.

Account Payable (A/P)

Money a company owes to suppliers for goods or services received.

Deferred Revenue

Cash received in advance for services or products to be delivered in the future.

Short-term Assets

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

Long-term Assets

Assets that will provide value for more than one year.

Liabilities

Obligations or debts owed by a company to outside parties.

Debits and Credits

The two fundamental aspects of accounting entries, where debits increase assets and expenses and credits increase liabilities and income.

Trial Balance

A summary of all the balances from the general ledger accounts to check the accuracy of transactions.

Stockholders' Equity

The residual interest in the assets of the entity after deducting liabilities.

Common Stock

Shares representing ownership in a company and a claim on part of the company’s assets and earnings.

Retained Earnings

The cumulative amount of profit that a company has reinvested in itself rather than distributed to shareholders as dividends.

Current Liabilities

Obligations the company expects to settle within one year.

Non-current Liabilities

Obligations that are due beyond a year.

Prepaid Rent

Rent paid before the rental period begins, classified as an asset.

Prepaid Insurance

Insurance paid in advance, classified as an asset.