Accounting 3 and 4

Question 1

Accumulated Depreciation contra-asset account that summarizes the depreciation taken on an asset
book value the difference between an asset’s cost and its accumulated depreciation
contra asset account account whose balance is opposite the asset to which it relates; an asset account with a credit balance
internal transactions transactions that form the basis for adjusting entries that update the ledger without involving parties outside the business
work sheet informal working paper used by the accountant to organize data for the financial statements and lessen the possibility of overlooking an adjustment
adjusting entry entry made at the end of an accounting period to bring the balance of an account up to date; record internal transactions
straight-line method a popular method of calculating depreciation that yields the same amount of depreciation for each full period an asset is used
Depreciation allocation process in which cost of long-term asset (except land) is divided over periods in which the asset is used in the production of the business’s revenue
matching principle rule of accounting that requires that expenses be recorded in the accounting period in which they were incurred; provides objective measure of net income or loss for an accounting by offsetting against revenue earned the expenses that were necessary to produce that revenue
source documents business documents that support or provide proof that business transactions have occurred; basis for journal entries
transposition type of posting error caused by reversal of consecutive digits such as entering 240 or 420
principle of materiality the principle that proper accounting procedures have to be strictly followed only for events and transactions that would have an effect on a business’s financial statements
principle of objective evidence the principle that source documents should form the foundation for recording business transactions
accounting cycle The sequence of steps in the accounting process completed during the fiscal period
book of final entry the ledger to which amounts are transferred (posted) from the journal
balance form of an account standard ledger account form expanded to include two balance columns for keeping a running, continuous, balance
book of final entry the ledger to which amounts are transferred (posted) from the journal
book of original entry the journal in which transactions are first formally recorded
chart of accounts directory or listing of accounts in the ledger
compound entry entry requiring three or more accounts
posting the process of transferring transactions from the journal to ledger
journalizing process of recording transactions in a journal
slide a type of posting error caused by incorrectly placed decimal point
general journal basic form of journal that has two money columns and compared to special journal used to record specific types of transactions
cross-reference a ledger account number in the posting reference (P.R.) column of the journal and the journal page number in the P.R. column of the ledger account