3 - Accounting Information System Flashcards
(40 cards)
The accounting cycle is a systematized process to create accounting information and consists of a number of distinct steps.
The preparation of financial statements is the ______ step in the accounting cycle, which begins with the _______, _______, and ________ of transactions, followed by the preparation of a trial balance.
The accounting cycle is a systematized process to create accounting information and consists of a number of distinct steps. The preparation of financial statements is the final step in the accounting cycle, which begins with the analyzing, recording, and posting of transactions, followed by the preparation of a trial balance.
Assets (from the statement of financial position) and expenses (from the income statement) have normal _______ balances.
Assets (from the statement of financial position) and expenses (from the income statement) have normal debit balances.
Liabilities and shareholders’ equity (from the statement of financial position) and revenues (from the income statement) have normal ______ balances.
Liabilities and shareholders’ equity (from the statement of financial position) and revenues (from the income statement) have normal credit balances.
“TAMFS”—
“TAMFS”— timely, accurate, monthly financial statements.
The system used to ______ and _________ transaction data and _________ financial information to decision makers is known as the accounting information system.
The system used to collect and process transaction data and communicate financial information to decision makers is known as the accounting information system.
Accounting cycle—a series of steps used to _______ for, and _______, transactions.
Accounting cycle—a series of steps used to account for, and report, transactions.
Accounting transactions occur when an economic event results in a company’s financial position (assets, liabilities, or shareholders’ equity) ________ in a measurable way.
Accounting transactions occur when an economic event results in a company’s financial position (assets, liabilities, or shareholders’ equity) changing in a measurable way.
Explain the Expanded Accounting Equation
Refer to Illustration 3.2
Net income = revenues − expenses
Ending retained earnings = Beginning retained earnings + net income − dividends declared
- it must always balance
If an individual asset is increased, there must be either a corresponding:
- decrease in another _______, and/or
- increase in a specific _______, and/or
- increase in _______ ______
If an individual asset is increased, there must be either a corresponding:
- decrease in another asset, and/or
- increase in a specific liability, and/or
- increase in shareholders’ equity
Unless you are told otherwise, you can assume in your assignments that goods or services purchased on account give rise to _______ _________ (as opposed to another type of payable).
Unless you are told otherwise, you can assume in your assignments that goods or services purchased on account give rise to accounts payable (as opposed to another type of payable).
Ex. Supplies -> Liability (A/P)
Unless you are told otherwise, you can assume in your assignments that goods or services provided on account give rise to ________ ________ (as opposed to another type of receivable).
Unless you are told otherwise, you can assume in your assignments that goods or services provided on account give rise to accounts receivable (as opposed to another type of receivable).
Ex. Provision of services on account
Explain Unearned Revenue
When cash is received prior to service/product the firm has a liability or obligation to either perform the service or return the cash.
Increases in expenses and dividends declared are shown as ______ amounts in the accounting equation because they _______ retained earnings and shareholders’ equity.
Increases in expenses and dividends declared are shown as negative amounts in the accounting equation because they reduce retained earnings and shareholders’ equity.
An account consists of three parts:
(1) the _____ of the account
(2) a left or _____ side
(3) a right or _____ side
An account consists of three parts:
1) the title of the account
(2) a left or debit side (Dr.
(3) a right or credit side (Cr.)
T account is also known as a general ______ account.
T account is also known as a general ledger account.
The entire group of accounts maintained by a company (whether called a T account or a general ledger account) is referred to as the ______.
The entire group of accounts maintained by a company (whether called a T account or a general ledger account) is referred to as the ledger.
The normal balance of an account is always the side that is used to _____ the account.
The normal balance of an account is always the side that is used to increase the account.
Increases in expense and dividends declared accounts are recorded by ________ and have normal ______ balances.
Increases in expense and dividends declared accounts are recorded by debits and have normal debit balances.
Overdraft results in bank _______.
Overdraft results in bank indebtedness.
Liabilities are on the right side of the accounting equation so liability accounts normally have _______ (____-side) balances.
Liabilities are on the right side of the accounting equation so liability accounts normally have credit (right-side) balances.
Increases in common shares, retained earnings, and revenue accounts are recorded by ______ and have normal ______ balances.
Increases in common shares, retained earnings, and revenue accounts are recorded by credits and have normal credit balances.
Expenses and dividends declared both decrease _______ earnings.
Expenses and dividends declared both decrease retained earnings (which in turn decrease shareholders’ equity).
Increases in expense and dividends declared accounts are recorded by ______ and have normal _____ balances.
Increases in expense and dividends declared accounts are recorded by debits and have normal debit balances.
Summary of debit and credit rules for expanded accounting equation
Review Illustration 3.7
