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Acct101 > Course Overview Study > Flashcards

Course Overview Study Flashcards

1
Q

What is financial accounting?

A

The process of identifying, recording, summarizing and analyzing an entities financial transactions and reporting them in Financial Statements.

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2
Q

What is the CORE principle of accounting?

A

Stuff that the business owns is equal to the stuff the business owns.

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3
Q

What is the Accounting Equation?

A

Assets=Liabilities(for third parties)+Equity(for owners)

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4
Q

What is a Credit?

A

A credit represents the sources that economic benefit flows from.

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5
Q

What is a debit?

A

A debit represents the destination where economic benefit flows to.

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6
Q

What is a General Ledger?

A

A place that stores a complete record of all accounts and journal entries.

(Use to be a HUGE book, is now software like Quickbooks)

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7
Q

What is an Account?

A

A place where we record, sort and store all financial transactions that affect a related group of items.

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8
Q

How do you get a journal entry into the general ledger?

A

You post it to your accounts.

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9
Q

What are the 6 types of accounts?

A

Assets
Liabilities - Our Accounting Equation
Equity
&
Revenue
Expenses - These feed into Equity
Dividends (or withdraws)

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10
Q

What type of account is Cash?

A

Asset

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11
Q

What type of account is Accounts Receivable?

A

Asset

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12
Q

What kind of account is Inventory?

A

Asset

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13
Q

What type of account is Pre-paid Expenses?

A

Asset

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14
Q

What type of account is Plant Property & Equipment?

A

Assets

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15
Q

What type of account is Accounts Payable?

A

Liability

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16
Q

What type of account is Salaries Payable?

A

Liability

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17
Q

What type of account is Accrued Expenses?

A

Liability

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18
Q

What type of account is Long-Term Loans?

A

Liabilities

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19
Q

What type of account is Owners Equity?

A

Equity

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20
Q

What type of account is Retained Earnings?

A

Equity

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21
Q

What type of account is Subscription Revenue?

A

Revenue

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22
Q

What type of account is Advertising Revenue?

A

Revenue

23
Q

What type of account is Cost of Goods Sold?

A

Expense

24
Q

What type of account is Overhead Expenses?

A

Expense

25
Q

What type of account is Interest Expense?

A

Expense

26
Q

What type of account is Tax Expenses?

A

Expense

27
Q

In a T-Account, which side is the Credit Side?

A

The Right Side

28
Q

In a T-Account, where do Debits go?

A

On the Left side.

29
Q

What is a Trial Balance?

A

An internal report showing the closing balances of all general ledger accounts. This summarizes, the closing numbers in all accounts.

30
Q

What is the Trial Balance used for?

A

It can help us check for errors, but ultimately we use it to make financial statements.

31
Q

How do you build a Trial Balance?

A

List out all of your accounts and closing balances.

32
Q

What is a Closing Balance?

A

The cumulative total of all transactions affecting an account.

33
Q

What is a Trial?

A

A test to make sure your credits and debits match or equal each other.

34
Q

What do you do after you create the trial balance?

A

You post to adjusting entries.

35
Q

What are Adjusting Entries?

A

Journal entries posted at the end of an accounting period to bring a business’s books in line with the accrual method of accounting.

36
Q

What rules do you follow in accounting according to the area?

A

IFRS- International Financial Reporting Standards

Or some variation of

GAAP- Generally Accepted Accounting Principles

37
Q

What is the purpose of the two rule books IFRS and GAAP?

A

To make sure your financial statements collect a true and fair view of your business.

Lenders and investors particularly need accurate financial statements.

38
Q

What does the Accruel Method of accounting mean?

A

You need to recognize your revenue as you earn it and record your expenses as you incur them.

39
Q

What is the most accurate way to calculate your profit?

A

The Accruel Method of Accounting.

40
Q

What does the Cash Accounting Method mean?

A

It means you recognize your revenue as you receive cash and you record your expenses as you pay it out.

41
Q

Is receiving cash the same as earning revenue?

A

No

42
Q

What are Financial Statements?

A

Accounting reports that summarize a businesses activities over a period of time.

External reports designed to give investors, lenders and creditors and understanding of your businesses financial health.

43
Q

What are the three main Financial Statements?

A

Balance Sheet
Income Statement
Cash Flow Statement

44
Q

What can you build the 3 main Financial Statements with?

A

The Adjusted Trial Balance

45
Q

What is the Balance Sheet?

A

It gives us a snapshot of a businesses assets, liabilities and equity at a single point in time.

It can teach the readers about the financial position of the company. They can see what you own and what you owe at the end of the financial year.

46
Q

What is an Income Statement?

A

An income statement summarizes the businesses revenue, and expenses over a period of time.

It gives the readers a glimpse of the companies financial performance and profitability.

47
Q

Is Profit and Cash Flow the same thing?

A

No. You keep track of your cash flow in the Cash Flow Statement.

48
Q

What is a Cash Flow Statement?

A

A report that summarizes a companies cash inflows and outflows over the same period of time.

49
Q

What do investors use to analyze business reports?

A

Financial Ratio

Find out more about this.

50
Q

What do you do after you complete your financial statements?

A

Post Closing Entries

51
Q

What is a Closing Entry?

A

A journal entry that transfers balances from temporary accounts to permanent accounts in the balance sheet.

52
Q

How do you clear down your Revenue and Expense accounts to zero in the Closing Entry?

A

Debit to your Revenue accounts and Credit to your Expense Accounts.

53
Q

After you clear down your Revenue and Expense accounts with a Closing Entry, where do the Retained Earnings go?

A

To the Equity section of the Balance Sheet.

These are profits you are holding onto for the future.

54
Q

What will you see when you go to your Post Closing Trial Balance after your Closing Entry?

A

The Revenue and Expense accounts have been reset to 0.

This completes the Accounting Cycle.

Acct101 (8 decks)

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