ACC2013 Ch3 Pt1 Key Vocabulary

Vocabulary flashcards covering key concepts from the lecture notes on the accounting cycle, T accounts, normal balances, and the trial balance.

Accounting Cycle

The sequence of steps to record and summarize financial transactions: analyze, journalize, post to the ledger, prepare a trial balance, adjust entries, and report financial statements.

T-Accounts

A visual representation of accounts with a left (debit) and right (credit) side used to show the effects of transactions on the accounting equation.

Debit (Dr.)

The left side of a T-account. Increases Assets, Expenses, and Dividends; decreases Liabilities, Stockholders’ Equity, and Revenues.

Credit (Cr.)

The right side of a T-account. Increases Liabilities, Stockholders’ Equity, and Revenues; decreases Assets, Expenses, and Dividends.

Assets

Resources controlled by the business expected to bring future economic benefits.

Liabilities

Obligations of the company to outsiders; present debts or amounts owed.

Stockholders’ Equity

Owner’s claim on the company’s assets; equals Common Stock plus Retained Earnings.

Normal Balance - Asset

Debit side is the normal balance for Asset accounts.

Normal Balance - Liabilities and Stockholders’ Equity

Credit side is the normal balance for Liabilities and Stockholders’ Equity accounts.

Normal Balance - Revenue

Credit side is the normal balance for Revenue accounts.

Normal Balance - Expenses

Debit side is the normal balance for Expense accounts.

Normal Balance - Dividends

Debit side is the normal balance for Dividends accounts.

Beginning Balance (Beg. Balance)

The starting balance of an account at the beginning of a period.

Ending Balance (End Balance)

The balance of an account at the end of a period.

Double-Entry Accounting

A system in which every transaction affects at least two accounts, keeping the accounting equation in balance.

Accounting Equation

Assets = Liabilities + Stockholders’ Equity; the foundation of the balance sheet.

Posting to T-Accounts

Transferring journal entries to the T-accounts in the general ledger to show per-account effects.

Journal Entries vs T-Accounts

Journal entries record transactions chronologically; T-accounts show the effects on each account and help analyze increases and decreases.

Trial Balance

A listing of all accounts with their debit or credit balances to verify that total debits equal total credits.

Common Stock

Owner contributed capital; part of Stockholders’ Equity.

Retained Earnings

Accumulated net income retained in the business; increases with net income and decreases with net loss and dividends.

Service Revenue

Revenue earned from providing services; increases Stockholders’ Equity through Retained Earnings.

Salaries Expense

Expense related to salaries; increases Expenses and reduces Net Income.

Prepaid Rent

Asset representing rent paid in advance that will be expensed over time.

Unearned Revenue

Liability representing cash received for goods or services not yet delivered.

Accounts Receivable

Asset representing amounts owed by customers for services or goods provided on credit.

Accounts Payable

Liability representing amounts owed to suppliers or vendors.