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  1. Assets
    Cash, properties, or things of value owned by the business.

    All the goodies, anything with value.
  2. Liabilities
    Amount the business owes to creditors.

    Amounts the business owes to others.
  3. Owner's Equity
    Also called, Owner's Capital. The owners investment or net worth.

    The amount by which business assets exceed business liabilities.

    What the business press three owner. The good stuff left for the owner assuming all liabilities have been paid.
  4. Revenue
    Consist of amount earned by a business, such as fees earned for performing services, income from selling merchandise, rent income for the use of property, or interest earned for lending money.

    Also called Income.
  5. Expenses
    The cost of revenue-that is, of doing business- such as wages expense, rent expense, interest expense, and advertising expense.

    Also called cost.
  6. Accounting Equation
    Assets= Liabilities +Owners Equity(capital)+ revenue-expenses.

    • Abbreviated or simple version:
    • Property = Property Rights

    • Expanded Version:
    • Assets = Liabilities + Owner's Equity (Capital)

    • Fully Expanded Version:
    • Assets = Liabilities + beginning Owner's equity (Capital) + Additional Owner Investments + Revenues - Expenses - Draws
  7. Owner's Investments
    Additional amounts, either cash out other property, which the owner pots in his business.
  8. Owner's Drawing
    Amounts the owner withdraws from his business for living and personal expenses.
  9. Types of Assets
    • Cash, Accounts Receivable, Notes Receivable, Inventory, Office Supplies, Land, Buildings,
    • Equipment, Furniture.
  10. Types of Liabilities
    Accounts Payable, Notes Payable, Mortgage Payable.
  11. Types of Revenue
    Sales of Products, Sales of Services, Rental Income, interest Income
  12. Types of Expenses
    Supplies, Salaries, Payroll Taxes, Advertising, Utilities, Building Rental, Maintenance & Repairs
  13. Bookkeeper
    A person who solely records accounting information
  14. Accountant
    A professional with the education and experience to design an accounting system, prepare reports, and interpret their results.
  15. Accounting process (six steps):
    • 1. Analyzing
    • 2. Recording
    • 3. Classifying
    • 4. Summarizing
    • 5. Reporting
    • 6. Interpreting
  16. Business Entity
    An individual, association, or other organization that engages in business activities.
  17. Basic accounting elements:
    • 1. Assets
    • 2. Liabilities
    • 3. Owner's Equity
  18. Transaction
    Any activity of a business that affects the accounting equation.
  19. Cost Principle
    The actual amount paid or received is the amount recorded.
  20. Net Income
    When the total revenue of the period exceeds total expenses.
  21. Net Loss
    When the total expenses of the period exceed total revenue.
  22. Fiscal Year
    Any accounting period of twelve months' duration.  (can also be a calendar year)
  23. Drawing
    A personal expense and not a business expense.
  24. Financial Statements must be prepared in what order?
    • 1. Income Statement
    • 2. Statement of Owner's Equity
    • 3. Balance Sheet
  25. Income Statement - Most important
    Shows total revenue, total expenses, and a net income or net loss for a period of time.

    *an investment or withdrawal of cash by owner is not considered a business expense and is not recognized on the income statement.

    Decision to continue, expand or contract a business are often based upon information reported in the income statement.
  26. Statement of Owner's Equity
    Shows what happened to the owner's capital account during the accounting period.
  27. Balance Sheet
    Shows the assets, liabilities, and owner's equity of a business as of a specified date.
  28. Source Document
    A piece of paper or source of information hat contains data that affect the business.

    Example: cash receipt.
  29. Journalizing
    Recording the debit and then the credit of each transaction in the journal
  30. Posting
    The process of entering the journal amounts into the appropriate general ledge accounts
  31. Permanent accounts
    The have ongoing balances for one accounting period to the next.

    Assets, Liabilities, Owner's Equity
  32. Temporary Accounts
    Used to match this month's revenues with this expenses.

    Revenue, Expenses & Drawing
  33. Chart of Accounts
    List of all accounts used by a business.

    • Assets: 100
    • Liabilities: 200
    • Owner's Equity: 300
    • Revenue:400
    • Expenses: 500
  34. Book of Original Entry
    General Journal
  35. Proving the Journal
    Totaling the debit and credit columns of the general journal and placing small pencil footings at the bottom of each column.  Another way to check that debits equal credits.
  36. Ledger
    A book of accounts that contains a separate account for each account listed in the cart of accounts
  37. cross-reference
    Providing a line between the journal and the ledger.  By check the ledger account, you can see where the entry was posted from. By checking the journal, you can see which account received the posting.
  38. Accounting Cycle
    Used to describe the steps involved in accounting for all the business activities during a time period.

    • 1) Analyze source documents
    • 2) Journalize transactions in the general journal.
    • 3) Post transactions from the general journal to the general ledger.
    • 4) Prepare a trial balance
    • 5)Prepare a work sheet.
    • a) Analyze adjustments and enter onto the work sheet.
    • b) Complete the work sheet.
    • 6) Prepare the financial statements, using the work sheet as a guide.
    • 7)Journalize and post adjusting entries, using the work sheet as a guide.
    • 8) Journalize and post closing entries, using the work sheet as a guide.
    • 9) Prepare a post-closing trial balance.
  39. Work Sheet
    Lists all the accounts from the general ledger that have a balance or will have a balance after the adjusting entries are entered.

    Work Sheet is NOT a financial statement.  Normally prepared in pencil.
  40. Adjusting Entries
    Entries needed in order to bring certain accounts up to date.
  41. Matching Concept
    States that the amount of revenue earned during an accounting period must be matched with the expenses incurred to generate that revenue.
  42. NOTE****
    All adjusting entries will affect one balance sheet account title and one income statement account title.

    All revenue and expense accounts appear in the INCOME STATEMENT columns

    All other account, including the owner's drawing account, appear in the BALANCE SHEET column
  43. Depreciation
    The process of allocating the cost of a depreciable asset over its useful life.
  44. Accrual Basis
    Revenue and expenses are recognized when earned or incurred, regardless of when cash is received or paid.
  45. Modified Cash Basis
    Revenue and expenses are recognized only when cash is received or paid.
  46. Interim Financial Statement
    Statements covering less than a year.
  47. Contra Asset
    An offsetting or opposite account and should be deducted from the related asset account.
  48. Book Value
    The difference between the asset account and its related accumulated depreciation (contra asset amount)
  49. Statement of Owner's Equity
    Connecting link between the income statement and the balance sheet.
  50. Current Assets
    Assets that will be used up with a year.

    Listed in liquidity order.

    Cash, Accounts Receivable, Supplies, Prepaid Insurance
  51. Liquidity
    How quickly the current asset can be converted into cash or can be used up as an expense.
  52. Long-Term Assets
    Assets that will last more than one year.
  53. Current Liabilities
    Debts that will be paid in less than a year.
  54. Long-Term Liabilities
    Debts that will be paid after one year or more.
  55. Adjusting Entry
    A general journal entry to record an end-of-period adjustment to an account.
  56. Adjustments
    Increases or decreases to accounts that are indicated on the work sheet at the end of the accounting period.
  57. Temporary Owner's Equity Account
    Used to accumulate balances to list income and expenses for the period.
  58. Closing Procedure
    The process of reducing temporary accounts to zero balances.
  59. Income Summary
    A temporary account used only for the closing procedure.

    Called Expense and Revenue Summary, Profit and Loss Summary, or Profit and Loss.
  60. Closing Entries
    General Journal entries that close out (zero out) the balances of all temporary owner's equity accounts.
  61. Permanent Accounts
    The general ledger accounts with balances after the closing entries are journalized and posted.
  62. Post-closing Trial Balance
    A listing of all general ledger accounts that remain open (permanent accounts) after the closing process is complete (journalized and posted).
  63. Accrued Wages
    Earned but not yet paid
  64. Reversing Entries
    Used to eliminate balances in asset or liability accounts so that entries made in subsequent accounting periods will be correct without considering balances caused by adjusting entries.
  65. Cash Receipts
    Cash and cash items received by a business
  66. Internal control
    Involves the methods designed to safeguard assets.
  67. Cash items on hand
    Includes checks, drafts, credit card receipts, and money orders that have not yet been deposited in the bank.
  68. Cash Payments
    Cash and cast items paid by a business.  Payments may be made in cash or by check.
  69. Cash in Bank
    Bank Account
  70. Cash Short and Over
    A special ledge account which is used to keep track of daily shortages and overages of cash.
  71. Change Fund
    Classified as an asset and appears in the balance sheet as a current asset.
  72. Petty Cash Fund
    A fund to pay small or little items
  73. Petty Cash Payments Record
    A formal record of all payments from the petty cash fund.
  74. Signature Card
    A card kept on record completed and signed by each person authorized to sign checks.
  75. Deposit Ticket
    Summarized the count of coins, currency, and checks being deposited.
  76. Endorsement
    Consists of stamping or writing the depositor's name on the back of the check.  Two basic endorsements: 1) Blank and 2) Restrictive
  77. Blank Endorsement
    The depositor simply signs his or her name on the back of the check.  The check is payable to any bearer.
  78. Restrictive Endorsement
    The depositor adds words such as "ForDeposit Only" or "Pay to Laura Kramer Only".  This restricts the payment of the check.
  79. Drawer
    The depositor who orders the bank to pay cash.
  80. Drawee
    The bank on which the check is drawn.
  81. Payee
    The person being paid the cash.
  82. Bank Statement
    Statement of account from the bank
  83. Outstanding Checks
    Checks written by the depositor that have not yet cleared the bank for payment
  84. Deposits in Transit
    Deposits recorded on the depositor's books but have not yet been received or recorded on the bank records.
  85. Service Charge
    Bank Charges for services such as check processing and printing.
  86. Collections
    Collections of promissory notes or charge accounts made by the bank on behalf of the depositor.  Interest may have been earned on the promissory note left for collection.
  87. Deductions
    Deductions for the payment of authorized bills, such as rent or mortgage payments.
  88. Non Sufficient Funds (NSF) checks
    These checks were rejected b the bank because the customer (drawer) did not have sufficient funds to cover the amount.
  89. Errors
    Errors made by the bank or the depositor.
  90. Salary
    Usually expressed as an annual figure or monthly amount
  91. Wages
    Earnings that are based on the number of hours worked or units produced.
  92. Employee
    Earns a salary or wages and is under the control and direction of an employer.
  93. Independent Contractor
    One who performs a service for a fee but in not subject tot he control of those for who the service is performed.
  94. Regular Wages
    Computing by multiplying hours worked by the hourly wage rate.
  95. Fair Labor Standards Act
    Commonly called the Federal Wage Hours Law and provides that employers must pay one and one-half times the regular rate for overtime.
  96. Overtime
    Hours worked over 40 hours per week.
  97. Withholding Allowance
    An amount on which no federal income tax will be withheld.
  98. Wage-bracket method
    Employers who do not automated payroll accounting use this methods.
  99. FICA Taxes
    Social Security (FICA) Taxes
  100. OASDI or Social Security Tax/Health Insurance (HI) or Medicare Tax
    Amount withheld for contribution to federal programs to old-age, survivor's, and disability insurance.
  101. Payroll Register
    A multi-column form used to collect and compute payroll data for employees.
  102. Employee's Earnings Record
    Provides cumulative information with each new pay period.
  103. Recording the Payroll
    The process of recording gross earnings of employees and their withholdings.
  104. Federal Unemployment Tax (FUTA)
    Levied on employers for the purpose of financing the cost of federal oversight of the state unemployment compensation program.
  105. State Unemployment Tax (SUTA)
    States have unemployment compensation laws that provide for payment of benefits to qualified unemployed workers.
  106. Merit Rating System
    Provides a tax-saving incentive to employers to stabilized employment.
  107. Recording Employer Payroll Taxes
    Debiting an account called Payroll Tax Expense for the total payroll taxes imposed on the employer.
Card Set:
2013-09-28 21:21:21

Basic Vocab
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