Exam 1 Definitions Flashcards
equation that shows a company’s resources (assets) equal
creditors’ and owners’ claims to those resources (liabilities and stockholders’ equity).
Accounting Equation
The rules of financial accounting
Generally accepted accounting principles (GAAP)
Resources owned by the company
Assets
amounts owed to creditors.
Liabilities
owners’ claims to resources.
Stockholder’s Equity
The amounts earned from selling products or services to customers.
Revenues
the costs of providing products and services.
Expenses
An economic event that initiates the accounting process of
recording it in the company’s accounting system.
Business Transaction
the specific time period (beginning and end) for which the accounts
are aggregated, balanced, and the financial statements are prepared.
Accounting Period
summary of the effects of all transactions related to a particular item over a
period of time.
Account
a list of all account names used to record transactions of a company.
Chart of Accounts
periodic reports published by the company for the purpose of providing information (communicate) to external users.
Financial Statement
Financial statement that reports the company’s revenues and expenses
over an interval of time.
Income Statement
financial statement that summarizes the changes in
stockholders’ equity over an interval of time
Statement of Stockholders’ Equity
financial statement that presents the financial position of the company on
a particular date.
Balance Sheet
financial statement that measures activities involving cash
receipts and cash payments over an interval of time.
Statement of Cash Flows
provides, in a single collection, each account with its
individual transactions and resulting account balance.
General Ledger
a chronological record of all transactions affecting a firm.
Journal
The process of transferring the debit and credit information from the journal to
individual accounts in the general ledger.
Posting
A list of all accounts and their balances before adjusting
entries are completed, showing the total debits and credits.
Unadjusted Trial Balance
liquid assets owned by the company. (debit, asset, balance sheet)
Cash
amounts the company expects to collect from customers
based on the delivery of service or products. (debit, asset, balance sheet)
Accounts Receivable
costs of assets acquired in one period that will be expensed in
a future period. (debit, asset, balance sheet)
Prepaid Expense
the cost of the merchandise purchased but not yet sold to customers.
(debit, asset, balance sheet)
Inventory
the cost of supplies (pens, paper, toner, etc.) used in the operation of a
business. (debit, asset, balance sheet)
Supplies
Promise to pay cash in the future to creditors when purchasing
supplies or materials. (credit, liability, balance sheet)
Accounts Payable
Total amounts owed to creditors for loaning money to the
company. (credit, liability, balance sheet)
Notes Payable
cash in advance from a customer for products or services to
be provided in the future. (credit, liability, balance sheet)
Deferred Revenue
Amount shareholders have invested in the business. (credit,
stockholders’ equity, balance sheet)
Common Stock
cumulative amount of net income earned over the life of the
company that has not been distributed to stockholders as dividends. (credit,
stockholders’ Equity, balance sheet)
Retained Earnings
the amounts earned from selling products or services to customers.
(credit, revenue, income statement)
Revenues
the costs of providing products and services. (debit, expense, income
statement)
Expenses
the difference between revenues and expenses. (calculation: revenues
– expense, income statement)
Net Income
cash payments to stockholders (owners). (debit, no major category,
stmt. of stockholders’ equity)
Dividend
