Cycle 1 Flashcards
Fundamental Accounting Equation
Assets = Liabilities + Owner’s Equity
Assets
(Own). Probable future economic benefits obtained or controlled by an entity as a result of past transactions or events
Liabilities
(Owe). Probable obligations (future sacrifices of economic benefits) of an entity as a result of past transactions or event
Equity
(Own-Owe=Net Ownership). Residual interest in the assets of an entity after deducting liabilities; Ownership in an entity
Current Assets
Cash and other assets that an entity expect to convert into cash, sell or consume in within one year
Categories of Current Assets
- Cash and cash equivalents
- Investments and marketable securities
- Accounts Receivable
- Inventory
- Prepaid Expenses
- Other
Categories of Non-Current Assets
- Long term investments
- PP&E (Property, Plant & Equipment)
- Accumulated Depreciation
- Intangibles
- Other assets
Current Liabilities
Obligations that an entity expects to satisfy within one year
Categories of Current Liabilities
- Accounts Payable
- Wages Payable
- Interest Payable
- Taxes Payable
- Accrued liabilities
- Current maturities of long-term debt
Non-Current Liabilities
Obligations that an entity expects to satisfy in greater than one year
Debit
An accounting entry that either increases an asset or expense account, or decreases a liability or equity or income account. It is positioned to the left in an accounting entry.
Credit
An accounting entry that either increases a liability or equity or income account, or decreases an asset or expense account. It is positioned to the right in an accounting entry.
Journal Entry
-Used in the double-entry accounting system developed in 1494 in Venice by Friar Luca Pacioli
-Records both sides of a transaction, so they always have at least two parts
Ledger
Data from the journal entries are “posted” to individual accounts (Cash, Debt, Stock, etc.) to accumulate the account balances
