Accounting Vocabulary Review

A set of 65 question-and-answer flashcards covering key accounting vocabulary terms and concepts from the lecture notes.

What accounting term refers to the liability created by a purchase on account?

Accounts Payable

What asset represents a claim against customers created by selling merchandise or services on credit?

Accounts Receivable

What is the accounting form used to record increases and decreases in each financial-statement item?

Account

What provides the framework upon which accounting standards are constructed and includes concepts such as the economic entity and going concern?

Accounting Assumptions

What name is given to the sequence that begins with analyzing and journalizing transactions and ends with the post-closing trial balance?

Accounting Cycle

Which equation shows the relationship among assets, liabilities, and owner’s equity and is expressed as Assets = Liabilities + Owner’s Equity?

Accounting Equation

What do we call the broad concepts that guide the preparation of financial statements and include principles such as cost, revenue recognition, and matching?

Accounting Principles

What term describes the rules that determine the accounting for individual business transactions?

Accounting Standards

What information system provides reports to stakeholders about the economic activities and condition of a business?

Accounting

Under which basis of accounting are revenues and expenses reported in the period in which they are earned or incurred, regardless of when cash is received or paid?

Accrual Basis

What word describes a revenue that has been earned or an expense that has been incurred but has not yet been recorded?

Accrual

What contra-asset account is credited when recording the depreciation of a fixed asset?

Accumulated Depreciation

Which trial balance is prepared after all adjusting entries have been posted?

Adjusted Trial Balance

What journal entries bring accounts up to date at the end of an accounting period?

Adjusting Entries

What do we call the analysis and updating of accounts when financial statements are prepared?

Adjusting Process

What term describes the resources owned by a business?

Assets

What phrase denotes the amount of the difference between debits and credits that have been entered into an account?

Balance of the Account

What statement lists the assets, liabilities, and owner’s equity of a business as of a specific date?

Balance Sheet

What is the difference between the cost of a fixed asset and its accumulated depreciation called?

Book Value

What term means an economic event or condition that directly changes an entity’s financial condition or affects its operations?

Business Transaction

What word defines an organization that assembles and processes resources into goods or services for customers?

Business

Which qualitative characteristic of financial information includes consistency and allows users to identify similarities and differences among reported items?

Comparability

What account shows the amount of the owner’s equity in the business?

Capital Account

Under which basis of accounting are revenues and expenses reported in the period in which cash is received or paid?

Cash Basis of Accounting

What title is given to accountants who have met a state’s education, experience, and examination requirements?

Certified Public Accountants

What list shows all accounts in the ledger along with their account numbers?

Chart of Accounts

Which journal entries transfer the balances of temporary accounts to permanent accounts at the end of the accounting period?

Closing Entries

What is the process of transferring the balances of temporary accounts to permanent accounts called?

Closing Process

What term describes an account that is offset against another account?

Contra Account

Which journal entry is prepared to correct an error in an entry that has already been journalized and posted?

Correcting Journal Entry

Which accounting concept states that an asset should be recorded and maintained in the accounting records at its initial transaction price?

Cost Principle

What is the amount entered on the right side of an account called?

Credit

What name is given to cash and other assets that are expected to be converted to cash, sold, or used up within one year through normal operations?

Current Assets

What term describes liabilities that will be due within a short time (usually one year or less) and are to be paid out of current assets?

Current Liabilities

What is the amount entered on the left side of an account called?

Debit

What term describes a future revenue or expense that is initially recorded as a liability or asset?

Deferral

What verb means to lose value or usefulness over time?

Depreciate

What term refers to the systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life?

Depreciation

What accounting system records increases and decreases in at least two accounts so that debits always equal credits?

Double-Entry Accounting System

What account shows the amount of withdrawals made by the owner?

Drawing Account

What term refers to amounts used to generate revenue; assets used up or services consumed in the process of generating revenues?

Expenses

What phrase describes physical resources such as equipment, machinery, buildings, and land that are owned and used in business operations and have long lives?

Fixed Assets

What do we call the record of a transaction entered in a journal, consisting of at least one debit and one credit?

Journal Entry

What is the initial record in which the effects of a transaction are recorded?

Journal

What term refers to the process of recording a transaction in a journal?

Journalizing

What term describes a group of accounts for a business?

Ledger

What phrase defines the rights of creditors that represent debts of the business?

Liabilities

What term refers to a company’s ability to convert assets into cash?

Liquidity

What name is given to liabilities that will not be due for a long time, usually more than one year?

Long-Term Liabilities

Which accounting principle states that expenses should be matched with the revenues they help to generate?

Matching Principle

What term denotes the side of an account (debit or credit) on which the balance normally appears?

Normal Balance

What is a customer’s written promise to pay an amount (and possibly interest) at an agreed-upon rate, supported by a formal instrument of credit?

Notes Receivable

What phrase describes the owner’s right to the assets of the business after all liabilities have been paid?

Owner’s Equity

What term is used for balance sheet accounts because their balances carry forward from year to year?

Permanent (Real) Accounts

What process involves transferring debits and credits from journal entries to the ledger accounts?

Posting

What assets are created by making advance payments for expenses, such as insurance premiums, that will be used in the future?

Prepaid Expenses

Which accounting principle states that revenues are recorded when earned, that is, when services are performed or products delivered?

Revenue Recognition Principle

What term represents increases in owner’s equity as a result of providing services or selling goods to customers?

Revenues

In a double-entry system, what term describes the specific guidelines for recording debits and credits based on the type of account?

Rules of Debit and Credit

What word denotes the ability of a firm to pay its debts as they come due?

Solvency

What is the simplest form of an account, consisting of an account title, a debit side, and a credit side?

T-Account

What term is used for income-statement accounts because their balances relate to only one period and are not carried forward?

Temporary (Nominal) Accounts

What summary lists the titles and balances of accounts in the ledger to verify that debits equal credits?

Trial Balance

Which trial balance is prepared at the end of an accounting period before adjusting entries are made?

Unadjusted Trial Balance

What liability is created by receiving revenue in advance?

Unearned Revenue