Ch 2 Accounting Information System Flashcards
accounting information system
collects and processes transaction data and communicates financial information to decision makers
general ledger accounting systems
software programs that integrate the various accounting functions related to sales, purchases, receivables, payables, cash receipts and disbursements, and payroll
entry-level programs
companies with revenue of <$5 million and up to 20 employees
enterprise resource planning (ERP) systems
typically used by manufacturing companies with more than 500 employees and $500 million sales
manual accounting systems
someone performs each of the steps in the accounting cycle by hand
robotic process automation (RPA) systems
designed to be user-friendly and help companies create efficiencies in their business processes
debit
left
credit
right
double-entry accounting
a company records the dual (two-sided) effect of each transaction in appropriate accounts
accounting cycle
the procedures that companies use to record transactions and prepare financial statements
transactions
a business’s economic events recorded by accountants
external transactions
involves economic events between the company and some outside enterprise
internal transactions
economic events that occur entirely within one company
journal
the book of original entry
general journal
the most basic form of a journal
journalizing
entering transaction data in the journal
general ledger
contains all the assets, liabilities, and stockholders equity accounts
chart of accounts
lists the accounts and the account numbers that identify their location in the ledger
trial balance
a list of accounts and their balances at a given time
adjusting entries
ensure that a company follows the revenue recognition and expense recognition principles
deferrals
expenses or revenues that are recognized at a date later than the point when cash was originally exchanged
prepaid expenses
assets paid for and recorded before a company uses them
depreciation
the process of expensing (allocating) the cost of an asset over its useful life in a rational and systematic manner
contra asset account
offsets an asset account on the balance sheet
book value
the difference between its cost and its related accumulated depreciation
unearned revenues
when companies receive cash before services are performed, they record a liability by increasing a liability account called
accrued revenues
revenues for services performed but not yet recorded at the statement date
accrued expenses
expenses incurred but not yet paid or recorded at the statement date
adjusted trial balance
proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments
closing process
reduces the balance of nominal (temporary) accounts to zero in order to prepare the accounts for the next period’s transactions
closing entries
prepared at the end of a company’s annual accounting period
post-closing trial balance
the trial balance after closing
reversing entry
the exact opposite of the adjusting entry made in the previous period
income statement
classifies amounts into such categories as gross profit on sales, income from operations, income before taxes, and net income
retained earnings statement
reconciles the balance of the retained earnings account from the beginning to the end of the period
balance sheet
shows the financial condition of a company at the end of a period
accrual-basis accounting
recognizes revenue when the performance obligation is satisfied and expenses in the period incurred, without regard to the time of receipt or payment of cash
strict cash basis
companies record revenue only when they receive cash
modified cash basis
a mixture of the cash basis and the accrual basis
ledger
the entire group of accounts maintained by a company
useful life
length/term of service
