Accounting Basics Flashcards
This listing of the general ledger accounts does not include the account balances or other amounts.
Chart of Accounts
Define:
“SG&A
(or)
selling, general and administrative”
These are a company’s operating expenses other than the cost of goods sold. They are also period costs (as opposed to product costs).
This asset is part of property, plant and equipment but it is not depreciated.
land
These are an integral part of the financial statements and are required by the full disclosure principle. They include the company’s significant accounting policies.
notes to the financial statements
Define:
“the accrual method of accounting
(or)
accrual basis of accounting”
This method reports revenues when they are earned (as opposed to when the cash is received) and reports expenses when they occur (as opposed to when they are paid).
Define: “Depreciation”
This is the allocation of a plant asset’s cost to expense over the asset’s useful life. The purpose is to match the asset’s cost to the years that benefit from its use.
Define:
“cash flow statement
(or)
statement of cash flows”
This financial statement reports the major changes in a corporation’s cash and cash equivalents. Amounts are grouped according to operating, investing, and financing activities.
Define:
“stockholders’ equity
(or)
shareholders’ equity”
The total amount for this section of a corporation’s balance sheet is the amount of assets minus liabilities. It reports the corporation’s paid-in capital, retained earnings, and any deduction for treasury stock. It is also the total amount of the corporation’s book value.
Define: “Credit”
This term indicates the right side of a general ledger account. It is also the normal balance for liability, stockholders’ equity, revenue, and gain accounts.
Define:
“cost principle
(or)
historical cost principle”
This basic underlying principle requires a transaction to be recorded at its cash value at the time of the transaction. It also prevents reporting the increases in the market value of property.
Define: “current assets”
This is defined as a company’s cash and other resources that are expected to turn to cash within one year of the balance sheet date (or within the operating cycle if the operating cycle is longer than one year).
Define: “liabilities”
These are the obligations of a company and are one of the main elements of the balance sheet and accounting equation. Deferred revenues are one of these.
Define: “Expenses”
Under the accrual method, these costs are reported on the income statement when they have been used up in the process of earning revenues.
Define: “Debit”
This term indicates the left side of a general ledger account. It is also the normal balance for asset, expense, and loss accounts.
Define: “assets”
These are a company’s resources that have future economic value which can be measured in the company’s currency. Prepaid expenses are one of these.