Basics Flashcards
What is financial accounting?
the process of identifying, recording, summarising and analysing an entity’s financial transactions and reporting them in financial statements
what are the 8 steps to accounting
- identify transactions
- prepare journal entries
- post journal in general ledger
- put together unadjusted trial balance
- post adjusting entries
- adjusted trial balance
- financial statements
- post closing entries
what do journal entries require
- unique journal number
- date
- description
- accounts effected
- debits/ credits
what is a general ledger
a database that stores a complete record of all accounts & journal entries
what is the definition for an account
a place where we record, sort & store all financial transactions that affect a related group of items
what are the 6 types of accounts
- assets
- liabilities
- equity
- expenses
- revenue
- dividend / drawings
what is a trial balance
an accounting report showing the closing balances of all general ledger accounts
how to adjust entries
journal entries posted at the end of an accounting period to bring a business’s books in line with the accrual method of accounting
what is the accrual method of accounting
revenue is recognised as its earned expenses are recorded as they are incurred
what is the double entry of accounting
- assets (business owns) = liabilities & equity ( business owes)
- credits = sources that economic benefit flows from
- debits = destinations that economic benefit flows too
what is a financial stamens and what are the three types
- account that summarise a businesses activities over a time period
three types
- balance sheet
- income statement
- cash flow statement
what is a closing entry
a journal entry that transfers balanced from temporary accounts to permanent accounts in the balance sheet
