Accounting Flashcards

Method that produces larger depreciation charges in the early years of an asset's life and smaller charges in its later years

Record within an accounting system in which increases and decreases are entered stored in a specific asset liability equity revenue or expense

Difference between total debits and total credits (including the beginning balance) for an account

Balance sheet that lists assets on the left side and liabilities ad equity on the right

Liability created by buying goods or services on credit; backed by the buyer's general credit standing

Information and measurement system that identifies records and communications relevant information about a company's business activities

Recurring steps performed each accounting period starting with analyzing transactions and continuing through the post-closing trial balance (or reversing entries)

Equality involving a company's assets liabilities and equity; Assets = Liabilities + Equity; also called balance sheet equation

People records an methods that collect and process data from transactions and events organize them in useful forms and communicate results to decision makers

Length of time covered by financial statements also called reporting period

Subsidiary ledger listing individual creditor (supplier) accounts

Amounts due from customers for credit sales; backed by the customer's general credit standing

Subsidiary ledger listing individual customer accounts

Measure of both the quality and liquidity of accounts receivable; indicates how often receivables are received and collected during the period; computed by dividing net sales by average accounts receivable

Accounting system that recognizes revenues when earned and expenses when incurred; the basis for GAAP

Costs incurred in a period that are both unpaid and unrecorded; adjusting entries for recording accrued expenses involve increasing expenses and increasing liabilities

Revenues earned in a period that are both unrecorded and not yet received in cash (or other assets); adjusting entries for recording accrued revenues involve increasing assets and increasing revenues

Cumulative sum of all depreciation expenses recorded for an asset

Ration used to access a company's ability to settle its current debts with its most liquid assets; defined as a quick assets (cash short-term investments and current receivables) divided by current liabilities

List of accounts and balances prepared after period-end adjustments are recorded and posted

Journal entry at the end of an accounting period to bring an asset or liability account to its proper amount and update the related expense or revenue account

Process of classifying accounts receivable by how long they are past due for purposes of estimating uncollectible accounts

Contra asset account with a balance approximating uncollectible accounts receivable; also called Allowance for Uncollectible Accounts

Procedure that (a) estimates and matches bad debts expense with its sales for the period and/or (b) reports accounts receivable at estimated realized value

Process of allocating the cost of an intangible asset to expense over its estimated useful life

Financial statements covering a one-year period; often based on a calendar year but any consecutive 12-month (or 52-week) period is acceptable

Summary of a company's financial results for the year with its current financial condition and future plans; directed to external users of financial information

Series of equal payments at equal intervals

Resources a business owns or controls that are expected to provide current and future benefits to the business

Analysis and report of an organization's accounting system its records and its reports using various tests

Accounts of customers who do not pay what they have promised to pay; an expense of selling on credit; also called uncollectible accounts

Account with debit and credit columns for recording entries and another column for showing the balance of the account after each entry

Financial statement that lists types and dollar amounts of assets liabilities and equity at a specific date

Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement

Bank report on the depositor's beginning and ending cash balances and a listing of its changes for a period

Accumulating source documents for a period of time and then processing them all at once such as once a day week or month

Expenditures to make a plant asset more efficient or productive; also called improvements

Asset's acquisition costs less its accumulated depreciation (or depletion or amortization); also sometimes used synonymously as the carrying value of an account

Corporation that does not qualify for nor elect to be treated as a proprietorship or partnership for income tax purposes and therefore is subject to income taxes; also called C corp

Checks that the bank has paid and deducted from the depositor's account

Additional costs of plant assets that provide material benefits extending beyond the current period; also called balance sheet expenditures

Record the cost as part of a permanent account and allocate it over later periods

Accounting system that recognizes revenues when cash is received and records expenses when cash is paid

Special journal normally used to record all payments of cash; also called cash payments journal

Reduction in the price of merchandise granted by a seller to a buyer when payment is made within the discount period

Short-term investment assets that are readily convertible to a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that market value is not sensitive to interest rate changes

Income statement account used to record cash overages and cash shortages arising from errors in cash receipts or payments

Special journal normally used to record all receipts of cash

Change in an accounting estimate that results from new information subsequent developments or improved judgment that impacts current and future periods

List of accounts used by a company; includes an identification number for each account

Another name for a cash disbursements journal when the journal has a column for check numbers

Balance sheet that presents assets and liabilities in relevant subgroups including current and noncurrent classifications

Entries recorded at the end of each accounting period to transfer end-of-period balances in revenue gain expense loss and withdrawal (dividend for a corporation) accounts to the capital account (to retained earnings for a corporation)

Necessary end-of-period steps to prepare the accounts for recording the transaction of the next period

Journal with more than one column

Corporation's basic ownership share; also generically called capital stock

Information system principle that prescribes an accounting system to conform with a company's activities personnel and structure

Key elements of an accounting information systems that include source documents input devices information processors information storage and output devices

Journal entry that affects at least three accounts

Physical equipment in a computerized accounting information system

linkage giving different users and different computers access to common databases and programs

Programs that direct operations of computer hardware

Principle that prescribes the less optimistic estimate when two estimates are about equally likely

Receiver of goods owned by another who holds them for purposes of selling them for the owner

Owner of goods who ships them to another party who will sell them for the owner

Principle that prescribes use of the same accounting method(s) over time so that financial statements are comparable across periods

Obligation to make a future payment if and only if an uncertain future event occurs

Account linked with another account and having an opposite normal balance; reported as a subtraction from the other account's balance

Information system principle that prescribes an accounting system to aid managers in controlling and monitoring business activities

General ledger account the balance of which (after posting) equals the sum of the balances in its related subsidiary ledger

Right giving the owner the exclusive privilege to publish and sell musical literary or artistic work during the creator's life plus 70 years

Business that is a separate legal entity under state or federal laws with owners called shareholders or stockholders

Consists of beginning inventory plus net purchases of a period

Cost of inventory sold to customers during a period; also called cost of sales

Accounting principle that prescribes financial statement information to be based on actual costs incurred in business transactions

Information system principle that prescribes the benefits from an activity in an accounting system outweigh the costs of that activity

Recorded on the right side; an entry that decreases asset and expense accounts and increases liability revenue and most equity accounts abbreviated Cr.

Notification that the sender has credited the recipient's account in the sender's records

Time period that can pass before a customer's payment is due

Description of the amounts and timing of payments that a buyer (debtor) agrees to make in the future

Individuals or organizations entitled to receive payments

Cash and other assets expected to be sold collected or used within one year of the company's operating cycle whichever is longer

Obligations due to be paid or settled within one year or the company's operating cycle whichever is longer

Portion of long-term debt due within one year or the operating cycle whichever is longer; reported under current liabilities

Ratio used to evaluate a company's ability to pay its short-term obligations calculated by dividing current assets by current liabilities

Date the directors vote to pay a divided

Date the corporation makes the dividend payment

Estimate of number of days needed to convert inventory into receivables or cash; equals ending inventory divided by cost of goods sold and then multiplied by 365; also called days' stock on hand

Measure of the liquidity of receivables computed by dividing the current balance of receivables by the annual credit (or net) sales and then multiplying by 365; also called days' sales in receivables

Recorded on the left side; an entry that increases asset and expense accounts and decreases liability revenue and most equity accounts; abbreviated Dr.

Notification that the sender has debited the recipient's account in the sender's records

Ratio of total liabilities to total assets; used to reflect risk associated with a company's debts

Individuals or organizations that owe money

Method that determines depreciation charge for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset's beginning-period book value

Corporation income taxes that are deferred until future years because of temporary difference between GAAP and tax rules

Process of allocating the cost of natural resources to periods when they are consumed and sold

Deposits recorded by the company but not yet recorded by its bank

Lists items such as currency coins and checks deposited an their corresponding dollar amounts

Cost of a plant asset less its salvage value

Expense created by allocating the cost of plant and equipment to periods in which they are used; represents the expense of using the asset

Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts

Expenses resulting from not taking advantage of cash discounts on purchases

Difference between face value of note payable and the (lesser) amount borrowed; reflects the added interest to be paid on the note over its life

Time period in which a cash discount is available and the buyer can make a reduced payment

Expected rate of return on investments; also called cost of capital hurdle rate or required rate of return

Corporate income is taxed and then its later distribution through dividends is normally taxed again for shareholders

Depreciation equals beginning book value multiplied by 2 times the straight-line rate

Accounting system in which each transaction affects at least two accounts and has at least one debit and credit

Use of electronic communication to transfer cash from one party to another

Additional compensation paid to or on behalf of employees such as premiums for medical dental life and disability insurance and contributions to pension plans

Record of all employee's net pay gross pay deductions and year-to-date payroll information

Programs that manage a company's vital operations which range from order taking to production to accounting

Abbreviation for end of month; used to describe credit terms for credit transactions

Owner's claim on the assets of a business; equals the residual interest in an entity's asset after deducting liabilities; also called net assets

Obligation of uncertain amount that can be reasonably estimated

Happenings that both affect an organization's financial position and can be reliably measured

Assets=Liabilities + Equity; Equity equals [Owner Capital - Owner Withdrawals + Revenues - Expenses] for a non-corporation; Equity equals [Contributed Capital + Retained Earnings + Revenues - Expenses] for a corporation where dividends are subtracted from

Outflows or using up of assets as part of a business to generate sales

Exchanges of economic value between one entity and another entity

Persons using accounting information who are not directly involved in running the organization

Major repairs that extend the useful life of a plant asset beyond prior expectations; treated as a capital expenditure

Bank authorized to accept deposits of amounts payable to the federal government

Taxes assessed on both employers and employees; for Social Security and Medicare programs

Payroll taxes on employers assessed by the federal government to support its unemployment insurance programs

Area of accounting mainly aimed at serving external users

Independent group of fulltime members responsible for setting accounting rules

Includes the balance sheet income statement statement of owner's (or stockholders') equity and statement of cash flows

Method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are the first sold

Consecutive 12-month (or 52-week) period closed as the organization's annual accounting period

Information system principle that prescribed an accounting system be able to adapt to changes in the company its operations and needs of decision makers

Annual report form filed with SEC by businesses (small businesses) with publicly-traded securities

IRS form used to report an employer's federal unemployment taxes (FUTA) on an annual filing basis

IRS form used to report FICA taxes owed and remitted

Annual report by an employer to each employee showing employee's wages subject to FICA and federal income taxes along with amounts withheld

Withholding allowance certificate filed with the employer identifying the number of withholding allowances claimed

privileges granted by a company or government to sell a product or service under specified conditions

Principle that prescribed financial statements (including notes) to report all relevant information about an entity's operations and financial condition

Expenses that support the operating of a business

All-purpose journal for recording the debits and credits of transactions and events

Partner who assumes unlimited liability for the debits and credits of transactions and events

Partnership in which all partners have mutual agency and unlimited liability for partnership debts

Rules that specify acceptable accounting practices

Rules that specify acceptable auditing practices

Principle that prescribes financial statements to reflect the assumption that the business will continue operating

Amount by which a company's (or a segment's) value exceeds the value of its individual assets less its liabilities

Gross margin (net sales minus cost of goods sold) divided by net sales; also called gross profit ratio

Method of recording purchases at the full price without deducting any cash discounts

Total compensation earned by an employee

Net sales minus cost of goods sold; also called gross margin

Procedure to estimate inventory when the past gross profit ratio is used to estimate cost of goods sold which is then subtracted from the cost of goods available for sale

Diminishment of an asset value

Method to account for petty cash maintains a constant balance in the fund which equals cash plus petty cash receipts

Condition in which the capacity of plant assets is too small to meet the company's production demands

Financial statement that subtracts expenses from revenues to yield a net income or loss over a specified period of time; also indicates any gains or losses

Temporary account used only in the closing process to which the balances of revenue and expense accounts (including any gains or losses) are transferred; its balance is transferred to the capital account (or retained earnings for a corporation)

Asset life that is not limited by legal regulatory contractual competitive economic or other factors

Component of an accounting system that interprets transform and summarizes information for use in analysis and reporting

Component of an accounting system that keeps data in a form accessible to information processors

Means of capturing information from source documents that enables its transfer to information processors

Long-term assets (resources) used to produce or sell products or services; usually lack physical form and have uncertain benefits

Charge for sing money (or other assets) loaned for one entity to another

Financial statements covering periods of less than one year; usually based on one- three- or six-month periods

All policies and procedures used to protect assets ensure reliable accounting promote efficient operations and urge adherence to company policies

Activities within an organization that can affect the accounting equation

Persons using accounting information who are directly involved in managing the organization

Group that identifies preferred accounting practices and encourages global acceptance; issues International Financial Reporting Standards (IFRS)

Goods a company owns and expects to sell in its normal operations

Number of times a company's average inventory is sold during a period; computed by dividing cost of goods sold by average inventory; also called merchandise turnover

Itemized record of gods prepared by the vendor that lists the customer's name items sold sales price and terms of sale

Document containing a checklist of steps necessary for approving the recording and payment of an invoice; also called check authorization

Record in which transactions are entered before they are posted to ledger accounts; also called book of original entry

Process of recording transactions in a journal

Obligations of a company with little uncertainty; set by agreements contracts or laws also called definitely determinable liabilities

Assets that increase the benefits of land have a limited useful life and are depreciated

Method to assign cost to inventory that assumes costs for the most recent items purchased are sold first and charged to cost of goods sold

Contract specifying the rental of property

Rights the lessor grants to the lesee under the terms of a lease

Alterations or improvements to leased property such as partitions and storefronts

Record containing all accounts (with amounts) for a business; also called general ledger

Party to a lease who secures the right to possess and use the property from another party (the lessor)

Party to a lease who grants another party (the lessee) the right to possess and use its property

Creditor's claims on an organization's assets; involves a probable future payment of assets products or services that a company is obligated to make due to past transactions or events

Owner can lose no more than the amount invested

Organization form that combines select features of a corporation and a limited partnership; provides limited liability to its members (owners) is free of business tax and allows members to actively participate in management

Partnership in which a partner is not personally liable for malpractice or negligence unless that partner is responsible for providing the service that resulted in the claim

Partners who have no personal liability for partnership debts beyond the amounts they invested in the partnership

Partnership that has two classes of partners limited partners and general partners

Resources suck as cash that are easily converted into other assets or used to pay for goods services or liabilities

Availability of resources to meet short-term cash requirements

Catalog (full) price of an item before any trade discount is deducted

Long-term assets not used in operating activities such as notes receivable and investments in stocks and bonds

Obligations not due to be paid within one year or the operating cycle whichever is longer

Required method to report inventory at market replacement cost when that market cost is lower than recorded cost

Entity who signs a note and promises to pay at it maturity

Area of accounting mainly aimed at serving the decision-making needs of internal users; also called management accounting

Company that uses labor and operating assets to convert raw materials to finished goods

Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses

Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP

Date when a note's principle and interest are due

Goods that a company owns and expects to sell to customers; also called merchandise or inventory

Entity that earns net income by buying and selling merchandise

Rating signed to an employer by a state based on the employer's record of employment

Depreciation system required by federal income tax law

Principle that assumes transactions and events can be expressed in money units

Income statement format that shows subtotals between sales and net income categorizes expenses and often reports the details of net sales and expenses

Legal relationship among partners whereby each partner is an agent of the partnership and is able to bind the partnership to contracts within the scope of the partnership's business

Twelve-month period that ends when a company's sales activities are at their lowest point

Assets physically consumed when used; examples are timber mineral deposits and oil and gas fields; also called wasting assets

Amount earned after subtracting all expenses necessary for and matched with sales for a period; also called income profit or earnings

Excess of expenses over revenues for a period

Method of recording purchases at the full invoice price less any cash discounts

Gross pay less all deductions; also called take-home pay

Expected selling price (value) of a item minus the cost of making the sale

Note with no stated (contract) rate of interest; interest is implicitly included in the note's face value

Maker's bank account has insufficient money to pay the check; also called hot check

Liability expressed by a written promise to pay a definite sum of money on demand or on a specific future date(s)

Asset consisting of a written promise to receive a definite sum of money on demand or on a specific future date(s)

Principle that prescribes independent unbiased evidence to support financial statement information

Condition in which because of new inventions and improvements a plant asset can no longer be used to produce goods or services with a competitive advantage

Approach to inputting data from source documents as soon as the information is available

Normal time between paying cash for merchandise or employee services and receiving cash from customers

Repairs to keep a plant asset in normal. Good operating condition; treated as a revenue expenditure and immediately expensed

Means by which information is taken out of the accounting system and made available for use

Checks written and recorded by the depositor but not yet paid by the bank at the bank statement date

Account showing the owner's claim on company assets; equals owner investments plus net income (or less net losses) minus owner withdrawals since the company's inception; also referred to as equity

Assets put into the business by the owner

Partner net income divided by average partner equity for the period

Unincorporated association of two or more persons to pursue a business for profit as co-owners

Agreement among partners that sets terms under which the affairs of the partnership are conducted; also called articles of partnership

Dissolution of a partnership by (1) selling noncash assets and allocating any gain or loss according to partners' income-and-loss ratio (2) paying liabilities and (3) distributing and remaining cash according to partners' capital balances

Exclusive right granted to its owner to produce and sell an item or to use a process for 17 years

Entity to whom a note is made payable

Bank account used solely for paying employees; each pay period an amount equal to the total employees' net pay is deposited in it and the payroll checks are drawn on it

Amounts withheld from an employee's gross pay; also called withholdings

Record for a pay period that shows the pay period dates regular and overtime hors worked gross pay net pay and deductions

Method that records the cost of inventory purchased but does not continuously track quantity available or sold to customers; records are updated at the end of each period to reflect the physical count and cost of goods available

Accounts that reflect activities related to one or more future periods; balance sheet accounts whose balances are not closed; also called real accounts

Method that maintains continuous records of the cost of inventory available and the cost of goods sold

Small amount of cash in a fund to pay minor expenses; accounted for using an imprest system

Tangible long-lived assets used to produce r sell products and services; also called property plant and equipment (PP&E) or fixed assets

List of permanent accounts and their balances from the ledger after all closing entries are journalized and posted

Process of transferring journal entry information to the ledger; computerized system automate this process

A column in journals in which individual ledger account numbers are entered when entries are posted to those ledger accounts

Statements that show the effects of proposed transactions and events as if they had occurred

Item paid for in advance of receiving their benefits; classifies as assets

Amount that the signer of a note agrees to pay back when it matures not including interest

Principles prescribing management to establish responsibility maintain records insure assets separate recordkeeping from custody assets divide responsibility for related transactions apply technological controls and perform reviews

Ratio of a company's net income to its net sales; the percent of income in each dollar of revenue; also called Net Profit Margin

Written promise to pay a specified amount either on demand or at a definite future date; is a note receivable for the lender but a note payable for the lendee

Term used by a purchaser to describe a cash discount granted to the purchaser for paying within the discount period

Document used by the purchasing department to place an order with a seller (vendor)

Document listing merchandise needed by a department and requesting it be purchased

Journal normally used to record all purchases on credit

Expected proceeds from converting an asset into cash

Form used to report that ordered goods are received and to describe their quantity and condition

Part of accounting that involves recording transactions and events either manually or electronically; also called bookkeeping

Information system principle prescribing that its reports be useful understandable timely and pertinent for decision making

Balance sheet that lists accounts vertically in the order of assets liabilities and equity

Method to estimate ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail

Intermediary that buys products from manufacturers or wholesalers and sells them to consumers

Monies received from an investment often in percent form

Expenditures reported on the current income statement as an expense because they do not provide benefits in future periods

The principle prescribing that revenue is recognized when earned

Gross increase in equity from a company's business activities that earn income; also called sales

Optional entries recorded at the beginning of a period that prepare the accounts for the usual journal entries as if adjusting entries had not occurred in the prior period

Uncertainty about an expected return

Corporation that meets special tax qualifications so as to be treated like a partnership for income tax purposes

Term used by a seller to describe a cash discount granted to buyers who pay within the discount period

Journal normally used to record sales of goods on credit

Estimate of amount to be recovered at the end of an asset's useful life; also called residual value or scrap value

List of the balances of all accounts in the accounts payable ledger and their total

List of the balances for all accounts in the accounts receivable ledger and their total

Federal agency Congress has charged to set reporting rules for organizations that sell ownership shares to the public

Segment operating income dividend by segment average (identifiable) assets for the period

Expenses of promoting sales such as displaying and advertising merchandise making sales and delivering goods to customers

Organization that provides services instead of tangible products

Owners of a corporation; also called stockholders

Equity of a corporation divided into ownership units; also called stock

Current obligation in the form of a written promissory note

Inventory losses that occur as a result of theft or deterioration

Includes the signatures of each person authorized to sign checks on the bank account

Income statement format that includes cost of goods sold as an expense and shows only one subtotal for total expenses

Being accountable for the impact that one's actions might have on society

Business owned by one person that is not organized as a corporation; also called proprietorship

Source of information for accounting entries that can be in either paper or electronic form; also called business papers

Any journal used for recording and posting transactions of a similar type

Method to assign cost to inventory when the purchase cost of each item in inventory is identified and used to compute cost of inventory

Computer program that organizes data by means of formulas and format; also called electronic work sheet

State payroll taxes on employers to support its unemployment programs

A financial statement that lists cash inflows (receipts) and cash outflows (payments) during a period; arranged and operating investing and financing

FASB publications that establish U.S. GAAP

Report of changes in equity over a period; adjusted for increases (owner investment and net income) and for decreases (withdrawals and net loss)

Method that allocates an equal portion of the depreciable cost of plant asset (cost minus salvage) to each accounting period in its useful life

List of individual sub-accounts and amounts with a common characteristic; linked to a controlling account in the general ledger

Information outside the usual accounting records; also called supplemental records

Tool used to show how the effects of transactions an the events on individual accounts

Accounts used to record revenues expenses and withdrawals (dividends for a corporation); they are closed at the end of each period; also called nominal accounts

Ratio of income before interest expense (and any income taxes) divided by interest expense; reflects risk of covering interest commitments when income varies

Assumption that an organization's activities can be divided into specific time periods such as months quarters or years

Measure of a company's ability to use its assets to generate sales; computed by dividing net sales by average total assets

Symbol name phrase or jingle identified with a company product or service

Exchange of economic consideration affecting an entity's financial position that can be reliably measured

List of accounts and balances prepared before accounting adjustments are recorded and posted

Balance sheet that broadly groups assets liabilities and equity accounts

Liability created when customers pay in advance for products or services; earned when the products or services are later delivered

Method that charges a varying amount to depreciation expense for each period of an asset's useful life depending on its usage

legal relationship among general partners that makes each of them responsible for partnership debt if the other partners are unable to pay their shares

Length of time an asset will be productively used in the operations of a business; also called service life

Buyer of goods or services

Seller of goods or services

Internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded

Journal (referred to as a book of original entry) in which all vouchers are recorded after they have been approved

Procedures and approvals designed to control cash disbursements and acceptance of obligations

Table of the amounts of income tax withheld from employee's wages

Agreement that obligates the seller to correct or replace a product or service when it fails to perform properly within a specified period

Method to assign inventory cost to sales; the cost of available-for-sale units is divided by the number of units available to determine per unit cost prior to each sale that is then multiplied by the units sold to yield the cost of that sale

Intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers

Payments of cash or other assets from a proprietorship or partnership to its owner or owners

Analyses and other informal reports prepared by accountants and managers when organizing information for formal reports and financial statements