Acc. Chap. 4

Card Set Information

Acc. Chap. 4
2011-06-12 21:10:17

Chapter 4
Show Answers:

  1. Work sheet
    • A useful tool for preparers in working with accounting info. Not available to external decision makers
    • Made at the end of the period
    • Step 1- enter unadjusted trial balance
    • Step 2-Enter adjustments
    • Step 3-Prepare adjsuted trial balance
    • Step 4-Sort Adjusted trial balance amounts to financial statements
    • Step 5-Total Statement columns, compute income or loss, and balance columns
  2. Closing process
    • An important step at the end of an accounting period after financial statements have been completed
    • Prepares accounts for recording transactions and events of the next period
    • Must identify accounts for closing
    • Must record and post closing entries
    • Must prepare a post-closing trial balance
    • Will reset revenue, expense, and withdrawals account balances to 0 at the end of each period
    • Helps in summarizing a period's revenues and expenses
  3. Temporary accounts
    • accumulate data related to one accounting period
    • Include income statements, withdrawals, and income summary accounts
    • Closed one the period is over
  4. Permanent accounts
    • Report on activities related to one or more future accounting periods
    • They carry their ending balances into the next period and cosist of all balance sheet accounts
  5. Closing entries
    To transfer the end-of-period balances in revenue, expense, and withdrawals accounts to the permanent capital account
  6. Income summary
    • A temporary account that contains a credit for the sum of all revenues and a debit for the sum of all expenses
    • Balances equals net income or net loss and is transferred to the capital account
    • Step 1-Close credit balances in revenue accts to income summary
    • Step 2- Close debit balances in expense accounts to income summary
    • Step 3-Close income summary to owner's capital
    • Step 4-Close withdrawals account to owner's capital
  7. Post closing trial balance
    A list of permanent accounts and their balances from the ledger after all closing entries have been journalized and posted.
  8. Accounting cycle
    • Refers to the steps in preparing financial statements
    • The steps are repeated each reporting period
    • 1. Analyze transaction
    • 2. Journalize
    • 3. Post
    • 4. Prepare unadjusted trial balance
    • 5. Adjust
    • 6. Prepare adjusted trial balance
    • 7. Prepare statements
    • 8. Close
    • 9. Prepare post-closing trial balance
    • 10. Reverse (optional)
  9. Unclassified balance sheet
    Items are broadly grouped into assets, liabilities, and equity
  10. Classified balance sheet
    Organizes assets and liabilities into important subgroups that provide more info. to decision makers
  11. Operating cycle
    The time span from when cash is used to acquire goods and services until cash is received from the sale of goods and services
  12. Current assets
    • Cash and other resources that are expected to be sold, collected, or used within one year or the company' operating cycle, whichever is longer
    • Examples- cash, short-term investments, accounts receivable, and short-term notes receivable
  13. Long term investments
    Examples are notes recievable, and investements in stocks and bonds
  14. Intangible assets
    long term resources that benefit business operations, usually lack physical form, and have uncertain benefits
  15. Current liabilities
    • Obligations due to be paid or settled within one year or the operating cyce, whichever is longer
    • Includes accounts payable, notes payable, and uneared revenue
  16. Long term liabilities
    Obligations not due within one year or the operating cycle, whichever is longer