Accounting Mid-Term Vocab

a period of time covered by an accounting report

a systematic process of recording and reporting the finacial information resulting from business transactions

a report of the balances in all asset, liability, and owner's equity accounts, at the end of the period

exists independently of its owner's personal holdings. The accounting records and reports are maintained separately and contain financial information related only to the business

money supplied by investors, banks, or owners of a business. Refers to the dollar value of assets contributed to the business

a legal written permission that gives a corporation certain rights and privileges and spells out the rules under which the corporation is to operate

business organization that is recognized by law to have a life of its own

an agreement to pay for a purchase at a later time; an entry to the right side of a T account

assets that are either used up or converted to cash during the normal operating cycle of the business, usually one year

debts of the business that must be paid within the next accounting period

the relationship between current assets and current liabilities; calculated by dividing the dollar amount of current assets by the dollar amount of current liabilities

an amount entered on the left side of the T account

a person who transforms ideas for products or services into real-world businesses

the cost of the goods or services that are used to operate a business; expenses decrease owner's equity

reporting information to external users (individuals not directly involved in the day-to-day operations of a business)

summarized information about the financial status of a business

prepared to summarize the changes resulting from business transactions that occur during an accounting period

a system in which people are free to produce the goods and services they choose

(generally accepted accounting principles) a set of rules used by accountants to prepare financial reports

the assumption that a business entity will continue to operate for an indefinite time

a report of the net income or net loss for a fiscal period; sometimes called a "profit and loss" statement

the measure of a business's ability to pay its current debts as they become due and to provide for unexpected needs of cash

the result of a company's spending more than it receives in revenue

reporting information to management, often referred to as accounting for internal users of accounting information

a business that transforms raw materials into finished products through the use of labor and machinery

principle stating that expenses are compared to revenues for the same period

a business that buys goods (for example, books or clothing) and then sells those goods for a profit

the amount of revenue that remains after expenses for the period are subtracted

the amount by which total expenses exceed total revenue

business owned by two or more persons, called partners, who agree to operate the business as co-owners

the amount of revenue earned above the expenses incurred to operate the business

ratios used to evaluate the earnings performance of a business during the accounting period (for example, return on common stockholders' equity)

a measure of the relationship between short-term assets and current liabilities

involves the comparison of two amounts on a financial statement and the evaluation of the relationship between these amounts

a format for preparing the balance sheet in which the classifications of accounts are listed one under another

the portion of each sales dollar that represents profit. To calculate this ratio, divide net income by sales

income earned from the sale of goods and services

accounting principle that states that revenue is recognized and recorded on the date it is earned even if cash has not been received

a single line drawn under a column of figures to signify that the entries above the rule are to be added or subtracted; a double rule under an amount signifies a total

provides a needed service for a fee

a business owned by one person

a financial statement prepared to summarize the effects of busines transactions on the capital account

accounts used to record information during the fiscal period that will be transferred to a permanent capital account at the end of the period

a proof of the equality of total debits and credits, the fifth step in the accounting cycle

the removal of cash or another asset from the business by the owner for personal use

a working paper used to collect information from ledger accounts for use in completing end-of-fiscal-period work