Chapter 2 Terms Flashcards
Has future purchasing power. E.g.: Coins, currency, cheques, and bank account balances.
cash
Occur when products or services are sold on account or on credit. When a sale occurs on account or on credit, the customer has not paid cash but promises to pay in the future.
accounts receivable
A promise from someone outside the organization to pay an amount on a specific future date plus a predetermined amount of interest.
notes receivable
Supplies to be used in the future. If the supplies are used before the end of the accounting period, they are an expense instead of an asset.
office supplies
Items to be sold in the future.
merchandise inventory
Represents an amount paid in advance for insurance. The prepaid insurance will be used in the future.
prepaid insurance
Represents an amount paid in advance for rent that will be used in the future.
prepaid rent
Cost must be in a separate account from any building. Used over future periods.
land
Indirectly help a business generate revenue over future accounting periods since they provide space for day-to-day operating activities.
buildings
accumulates detailed information regarding the increases and decreases in a specific asset, liability, or equity item.
account
Books where the accounts are maintained.
ledger
cash, accounts receivable, notes receivable, office supplies, merchandise inventory, prepaid insurance, prepaid rent, land, buildings
asset accounts
accounts payable, wages payable, short-term notes payable, long-term notes payable, unearned revenues
liability accounts
An obligation to pay for an asset in the future. The purpose is to finance investing activities that include the purchase of assets like land, buildings, and equipment.
liability
Debts owed to creditors for goods purchased or services received as a result of day-to-day operating activities. (Do not involve interest)
accounts payable
Wages owed to employees for work performed.
wages payable
Debt owed to a bank or other creditor that is normally paid within one year. These involve interest.
short-term notes payable
Debt owed to a bank or other creditor that is normally paid beyond one year. These involve interest.
long-term notes payable
Payments received in advance of the product or service being provided. The business owes a customer the product/service.
unearned revenues
Net assets owned by the owners of a business
equity
Represents the investments made by owners into the business and causes equity to increase.
share capital
The sum of all net incomes earned over the life of the corporation to date, less any dividends distributed to shareholders over the same time period. Includes revenues, expenses, and dividends.
retained earnings
The left side records debit entries and the right side records credit entries. A teaching/learning tool to show increases and decreases in an account.
T-account
