Accounting Chapters 1 and 2 Vocabulary

A set of 20 vocabulary flashcards covering accounting definitions, principles, assumptions, financial statements, and recording steps from Chapters 1 and 2.

Accounting

An info and management system that identifies, records, and communicates an org's business activities.

Financial Accounting

Provides information for external decision makers.

Managerial Accounting

Provides info for internal decision makers.

Financial Accounting Standards Board (FASB)

Created GAAP, or the Generally Accepted Accounting Principles, which are the rules all accountants must follow.

GAAP

Generally Accepted Accounting Principles, which are the rules all accountants must follow, created by the FASB.

Cost principle

Assets/services are recorded at their historical cost and do not fluctuate positively or negatively.

Revenue Recognition Principle

Revenue is recognized when goods/services are provided to customers.

Matching Principle

A company records the expenses it incurred to generate the revenue anticipated.

Going concern Assumption

We assume that the entity will remain in operation for the future.

Monetary Unit Assumption

All information in the financial statements is measured in one monetary unit (dollars, yen, etc).

Economic Entity Assumption

The business entity is always separate from other interests, and personal expenses are separate from business expenses.

Income Statement

A written statement with a header saying the company name, the name of the document, and the 'For the Month ended X' used to summarize the revenues and expenses.

Statement of Owner's Equity

A written statement with a header saying the company name, the name of the document, and the 'For the Month ended X' used to show changes in capital via withdrawals, beginning and ending capital, and net income.

Balance Sheet

A written statement with a header saying the company name, the name of the document, and the 'As of X Month' used to show a business's assets, Liabilities, and Equity as of a specific date.

Double Entry Accounting

Each transaction must impact at least two accounts, and they are recorded in 'T Charts'.

Normal Balance

What makes the account go up (Debit or Credit).

Steps for Recording Transactions

Record the transaction in the general journal, post the listings to the general ledger, and then prepare a trial balance.

General Journal

Identifies what accounts are affected and whether it is a credit or debit.

General Ledger

T-charts that prepare for trial balance.

Trial balance

Needs a header with company name, name of document, and specific date, and lists out all of the debits and credits.