Ch 2: Accounting for Business Transactions Key Terms

Vocabulary flashcards generated from accounting lecture notes.

Account

Record within an accounting system in which increases and decreases are entered and stored in a specific asset, liability, equity, revenue, or expense.

What are the eight types of Asset Accounts?

1. Cash

2. Accounts Receivable

3. Notes Receivable

4. Prepaid Accounts

5. Supplies Accounts

6. Equipment Acounts

7. Building Accounts

8. Land

What are four types of Liability Accounts?

1. Accounts Payable

2. Notes Payable

3. Unearned Revenue Accounts

4. Accrued Liabilities

What are the four types of Equity Accounts?

1. Owner Investments

2. Owner Distributions

3. Revenue Accounts

4. Expense Accounts

Account balance

Difference between total debits and total credits (including the beginning balance) for an account.

Balance column sheet

Account with debit and credit columns for recording entries and another column for showing the balance of the account after each entry.

Big Data

Extremely large datasets that are analyzed computationally to reveal patterns, trends, and associations.

What are the three V’s of Big Data?

1. Volume: refers to the vast amount of data that is generated and stored

2. Velocity: refers to the very rapid speeds at which data are created and processed

3. Variety: refers to the varied types of data generated, consisting of structured data, unstructured data, and semi structured data

Chart of accounts

List of accounts used by a company; includes an identification number for each account.

Compound Journal Entry

Journal entry that affects at least three accounts.

Credit

Recorded on the right side; an entry that decreases an asset or expense account, or increases a liability, revenue, or equity account; abbreviated Cr.

Creditors

Individuals or organizations entitled to receive payments.

Debit

Recorded on the left side; an entry that increases an asset or expense account, or decreases a liability, revenue, or equity account; abbreviated Dr.

Debt ratio

Ratio of total liabilities to total assets; used to reflect risk associated with a company’s debts.

Debtors

Individuals or organizations that owe money.

Double-entry accounting

Accounting system in which each transaction affects at least two accounts and has at least one debit and one credit.

General Journal

All-purpose journal for recording the debits and credits of transactions and events.

General Ledger

Record containing all accounts (with amounts) for a business; also called ledger.

Journal

Record in which transactions are entered before they are posted to ledger accounts; also called book of original entry.

Journalizing

Process of recording transactions in a journal.

Ledger

Record containing all accounts (with amounts) for a business; also called general ledger.

Machine learning

A subset of artificial intelligence that enables computers to learn and make choices by using algorithms and statistical modules.

Posting

Process of transferring journal entry information to the ledger; computerized systems automate this process

Posting reference (PR) column

A column in journals in which individual ledger account numbers are entered when entries are posted to those ledger accounts.

Source documents

Source of information for accounting entries that can be in either paper or electronic form; also called business papers.

T-account

Tool used to show the effects of transactions and events on individual accounts; shaped in the form of a T.

Trial Balance

List of ledger accounts and their balances (either debit or credit) at a point in time; total debit balances equal total credit balances.

What are the three steps to preparing a Trial Balance?

1. List each account title and its amount (from the ledger) in the trial balance

2. Compute the total of debit balances and the total of credit balances

3. Verify (prove) total debit balances equal total credit balances

What is an efficient way of searching for errors from the trial balance?

Check the journalizing, posting, and trial balance preparation in reverse order

Unearned revenue

Liability created when customers pay in advance for products or services; earned when the products or services are later delivered.