Untitled Quiz

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is accounting?

A method for decorating financial records.
Only recording financial transactions.
Planning, recording, analyzing, and interpreting financial information. (correct)
A way to manage personal finances.

What is an accounting system?

A planned process for providing financial information that will be useful to management.

What are accounting records?

Organized summaries of a business' financial activities.

What is a service business?

A business that performs an activity for a fee. Signup and view all the answers

What is a proprietorship?

A business owned by one person. Signup and view all the answers

What is an asset?

Anything of value that is owned. Signup and view all the answers

What are equities?

Financial rights to the assets of a business. Signup and view all the answers

What is a liability?

An amount owed by a business. Signup and view all the answers

What is owner's equity?

The amount remaining after the value of all liabilities is subtracted from the value of all assets. Signup and view all the answers

What is the accounting equation?

An equation showing the relationship among assets, liabilities, and owner's equity. Signup and view all the answers

What is a transaction?

A business activity that changes assets, liabilities, or owner's equity. Signup and view all the answers

What is an account?

A record summarizing all the information pertaining to a single item in the accounting equation. Signup and view all the answers

What is an account title?

The name given to an account. Signup and view all the answers

What is an account balance?

The amount in an account. Signup and view all the answers

What is capital?

The account used to summarize the owner's equity in a business. Signup and view all the answers

What is a balance sheet?

A financial statement that reports assets, liabilities, and owner's equity on a specific date. Signup and view all the answers

What is revenue?

An increase in owner's equity resulting from the operation of a business. Signup and view all the answers

What is a sale on account?

A sale for which cash will be received at a later date. Signup and view all the answers

What is an expense?

A decrease in owner's equity resulting from the operation of a business. Signup and view all the answers

What are withdrawals?

Assets taken out of a business for the owner's personal use. Signup and view all the answers

What is a T account?

An accounting device used to analyze transactions. Signup and view all the answers

What is a debit?

An amount recorded on the left side of a T account. Signup and view all the answers

What is a credit?

An amount recorded on the right side of a T account. Signup and view all the answers

What is normal balance?

The side of the account that is increased. Signup and view all the answers

What is a chart of accounts?

A list of accounts used by a business. Signup and view all the answers

What is a journal?

A form for recording transactions in chronological order. Signup and view all the answers

What is journalizing?

Recording transactions in a journal. Signup and view all the answers

What is an entry?

Information for each transaction recorded in a journal. Signup and view all the answers

What is a general journal?

A journal with two amount columns in which all kinds of entries can be recorded. Signup and view all the answers

What is double-entry accounting?

The recording of debit and credit parts of a transaction. Signup and view all the answers

What is a source document?

A business paper from which information is obtained for a journal entry. Signup and view all the answers

What is a check?

A business form ordering a bank to pay cash from a bank account. Signup and view all the answers

What is an invoice?

A form describing the goods or services sold, the quantity, and the price. Signup and view all the answers

What is a sales invoice?

An invoice used as a source document for recording a sale on account. Signup and view all the answers

What is a receipt?

A business form giving written acknowledgement for cash received. Signup and view all the answers

What is a memorandum?

A form on which a brief message is written describing a transaction. Signup and view all the answers

What is a ledger?

A group of accounts. Signup and view all the answers

What is a general ledger?

A ledger that contains all accounts needed to prepare financial statements. Signup and view all the answers

What is an account number?

The number assigned to an account. Signup and view all the answers

What is file maintenance?

The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current. Signup and view all the answers

What is opening an account?

Writing an account title and number on the heading of an account. Signup and view all the answers

What is posting?

Transferring information from a journal entry to a ledger account. Signup and view all the answers

What is proving cash?

Determining that the amount of cash agrees with the balance of the cash account in the accounting records. Signup and view all the answers

What is a correcting entry?

A journal entry made to correct an error in the ledger. Signup and view all the answers

What is a checking account?

A bank account from which payments can be ordered by a depositor. Signup and view all the answers

What is an endorsement?

A signature or stamp on the back of a check transferring ownership. Signup and view all the answers

What is a blank endorsement?

An endorsement consisting only of the endorser's signature. Signup and view all the answers

What is a special endorsement?

An endorsement indicating a new owner of a check. Signup and view all the answers

What is a restrictive endorsement?

An endorsement restricting further transfer of a check's ownership. Signup and view all the answers

What is a postdated check?

A check with a future date on it. Signup and view all the answers

What is a bank statement?

A report of deposits, withdrawals, and bank balances sent to a depositor by a bank. Signup and view all the answers

What is a dishonored check?

A check that a bank refuses to pay. Signup and view all the answers

What is electronic funds transfer?

A computerized cash payments system that uses electronic pulses to transfer funds. Signup and view all the answers

What is a debit card?

A bank card that, when making purchases, automatically deducts the amount of the purchase from the checking account of the cardholder. Signup and view all the answers

What is petty cash?

An amount of cash kept on hand and used for making small payments. Signup and view all the answers

What is a petty cash slip?

A form showing proof of a petty cash payment. Signup and view all the answers

What is a fiscal period?

The length of time for which a business summarizes and reports financial information. Signup and view all the answers

What is a work sheet?

A columnar accounting form used to summarize the general ledger information needed to prepare financial statements. Signup and view all the answers

What is a trial balance?

A proof of the equality of debits and credits in a general ledger. Signup and view all the answers

What are adjustments?

Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period. Signup and view all the answers

What is an income statement?

A financial statement showing the revenue and expenses for a fiscal period. Signup and view all the answers

What is net income?

The difference between total revenue and total expenses when total revenue is greater. Signup and view all the answers

What is a net loss?

The difference between total revenue and total expenses when total expenses is greater. Signup and view all the answers

What is component percentage?

The percentage relationship between one financial statement item and the total that includes that item. Signup and view all the answers

What are adjusting entries?

Journal entries recorded to update general ledger accounts at the end of a fiscal period. Signup and view all the answers

What are permanent accounts?

Accounts used to accumulate information from one fiscal period to the next. Signup and view all the answers

What are temporary accounts?

Accounts used to accumulate information until it is transferred to the owner's capital account. Signup and view all the answers

What are closing entries?

Journal entries used to prepare temporary accounts for a new fiscal period. Signup and view all the answers

What are post-closing entries?

A trial balance prepared after the closing entries are posted. Signup and view all the answers

What is the accounting cycle?

The series of accounting activities included in recording financial information for a fiscal period. Signup and view all the answers

What is the accounting period cycle?

Changes in financial information are reported for a specific period of time in the form of financial statements. Signup and view all the answers

What is adequate disclosure?

Financial statements contain all information necessary to understand a business' financial condition. Signup and view all the answers

What is a business entity?

Financial information is recorded and reported separately from the owner's personal financial information. Signup and view all the answers

What is consistent reporting?

The same accounting procedures are followed in the same way in each accounting period. Signup and view all the answers

What does going concern mean?

Financial statements are prepared with the expectation that a business will remain in operation indefinitely. Signup and view all the answers

What does matching expenses with revenue mean?

Revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period. Signup and view all the answers

What is objective evidence?

A source document is prepared for each transaction. Signup and view all the answers

What is a unit of measure?

Business transactions are stated in numbers that have common values; that is, using a common unit of measure. Signup and view all the answers

Study Notes

Accounting Concepts

Accounting: Involves planning, recording, analyzing, and interpreting financial information for decision-making.
Accounting System: A structured process designed to supply financial information for management's use.
Service Business: Engages in activities offered for a fee to clients.

Business Structures

Proprietorship: A business owned and operated by a single individual, bearing all responsibilities.
Asset: Valuable items owned by a business, contributing to its overall worth.
Equities: Represents the financial rights to the assets possessed by a business.
Liability: Obligations or debts owed by the business to external parties.

Financial Metrics

Owner's Equity: Calculated as the difference between total assets and total liabilities; reflects the owner's remaining interest in the business.
Accounting Equation: Assets = Liabilities + Owner's Equity; fundamental principle governing accounting.

Transaction Elements

Transaction: Any event affecting the financial position of the business, altering assets, liabilities, or owner's equity.
Account: A detailed record summarizing all information related to a specific item in the accounting equation.

Financial Statements

Balance Sheet: A snapshot of a business’s financial position at a specific date, detailing assets, liabilities, and owner’s equity.
Income Statement: Reports revenues and expenses over a fiscal period, allowing assessment of profitability.

Recording Processes

Journal: A chronological record of all financial transactions; entries include dates, amounts, and accounts affected.
Posting: The procedure of transferring journal entry data to respective ledger accounts.
Adjusting Entries: Journal entries made at the end of a period to align actual income and expenses with the accounting period.

Banking Transactions

Check: A document instructing a bank to pay a certain amount from the check writer’s account.
Endorsement: A signature on the back of a check allowing transfer of ownership.
Bank Statement: Periodic report detailing account transactions, including deposits and withdrawals.

Cash Management

Petty Cash: A small amount of cash kept on hand for minor expenses.
Electronic Funds Transfer (EFT): A system enabling the electronic movement of money between accounts.

Accounting Practices

Accounting Cycle: The comprehensive series of steps to record and analyze financial transactions throughout a fiscal period.
Adequate Disclosure: The practice of providing all necessary information on financial statements for clarity on financial condition.
Consistent Reporting: Ensures that accounting rules and procedures are uniformly applied across periods.

Financial Analysis

Net Income: The profit remaining after total expenses are deducted from total revenue.
Net Loss: Occurs when total expenses surpass total revenue within a period.
Component Percentage: The ratio of a specific financial item to the total that includes it, useful for analyzing financial statements.

Closing and Temporary Accounts

Temporary Accounts: Accounts used to collect data for a single period; balances are reset at the end of the period.
Closing Entries: Journal entries that finalize the temporary accounts for the new fiscal cycle.
Post-Closing Entries: A trial balance prepared following the closure of accounts, ensuring balance post-adjustments.

Important Accounting Principles

Going Concern: Assumes that a business will continue to operate indefinitely unless stated otherwise.
Matching Expenses with Revenue: Requires aligning revenues and related expenses within the same accounting period, promoting accurate financial representation.

Fundamental Definitions

Normal Balance: Refers to the usual side (debit or credit) that increases an account’s value.
Unit of Measure: Assures that transactions are recorded in a consistent numerical format, maintaining uniformity across financial records.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.