Exam 1 Terminology

Question 1

Statement of Income

Answer 1

Shows revenues received over a specific period of time

Shows expense and net income

Question 2

Cash flow statemetn

Answer 2

shows the incoming and outgoings of cash (like a check book) from one period to another

Question 3

Statement of equity

Answer 3

explains what the net worth of the company is. essentially a snapshot of the the worth of the company in a period of time

Question 4

CPA

Answer 4

Certified Public Accountant

Question 5

Accounting entity

Answer 5

the organization for which financial data are collected

Question 6

Scotckholders

Answer 6

owners with shares of a company

Question 7

Creditor

Answer 7

lender to the company

Question 8

dividends

Answer 8

portions of what a compnay earns in the form of cash payments to stockholders

Question 9

Heading of the Balance sheet

Answer 9

name, title, specific date,unit of measure ment

Question 10

Assets

Answer 10

cash, accounts receivable, inventories, etc.

Question 11

Liabilities

Answer 11

accounts payable, debts

Question 12

Net income does not equal

Answer 12

net cash generated by operations

Question 13

Audit

Answer 13

the examinations of financial reports to ensure what they claim conforms to GAAP

Question 14

Account

Answer 14

Organized way to generate any transactions on a financial statement item of a company

Question 15

Accounting cycle

Answer 15

The process used by entities to analyze and record transactions, adjust the records at the end of the period, prepare financial statements, and prepare the records for the next cycle.

Question 16

Additional paid in capital

Answer 16

the amount of contributed capital less the par value of stock

Question 17

Common stock

Answer 17

the basic value of a stock in a company

Question 18

Current Asset

Answer 18

Assets that will be tured into cash within one year

Question 19

Current Liabilities

Answer 19

Short term obligations that will be paid within one year or operating cycle

Question 20

T-Account

Answer 20

summarizes financial transactions of a company into debits and credits

Question 21

Stockholder’s Equity

Answer 21

financing provided by the owners of the company and the operations of the business

Question 22

Trial Balance

Answer 22

list of accounts with balances to provide a check on the equality of the debits and credits

Question 23

Accrual Basis Accounting

Answer 23

Records revenues when earned and and expenses when incurred, regardless of the timing of cash

Question 24

Cash basis accounting

Answer 24

records revenues when cash is earned and expenses when cash is paid

Question 25

Expense matching principle

Answer 25

requires expenses be recorded when incurred in earning revenue

Question 26

Expenses

Answer 26

decreases in assets or increases in liabilities from ongoing activities to incur revenues during the period.

Question 27

Gains

Answer 27

increases in assets or decreases in liabilities from peripheral activites

Question 28

Losses

Answer 28

decreases in assets or increases in liabilities form peripheral activies

Question 29

Operating Cycle

Answer 29

the time it takes to pay cash to suppliers, give goods to customers, and collect cash from customers

Question 30

revenue realization principle

Answer 30

Revenues are realized when 1) services are delivered 2)evidence of an agreement for the customer to pay 3) the price is fixed or determinable & 4) collection is reasonably assured

Question 31

Revenues

Answer 31

Increases in assets or decreases in liabilities from ongoing operations

Question 32

Time period assumption

Answer 32

the long life of a period can be shown through short periods

Question 33

Accrued expenses

Answer 33

previously unrecorded expenses that need to be adjusted at the end of an accounting period to reflect the amount incurred and its related payable account

Question 34

Accrued revenues

Answer 34

unrecorded revenues that need to be adjusted at the end of an accounting period to reflect the amount received and its related payable account

Question 35

Adjusting entries

Answer 35

entries at the end of an accounting period to measure all of the revenues and expense at the end of the period

Question 36

Closing Entry

Answer 36

made at the end of a period to transfer balances into temporary accounts to establish a zero balance in each of those temp accounts

Question 37

Contra Account

Answer 37

an account that is offset to the primary accoutn

Question 38

Deferred expenses

Answer 38

previously acquired assets that need to be adjusted at the end of an accounting period to reflect the amount of expense incurred in using the asset to creat revenue

Question 39

Deferred revenues

Answer 39

previous recorded liabilities that need to be adjusted at the end of the accounting period to reflect the amount of revenue earned

Question 40

Net Book value

Answer 40

the acquisition cost of an asset less accumulated by depreciation, depletion, or amortization.

Question 41

Permanent (real) accounts

Answer 41

accounts on the balance sheet that brings over their ending balances into the next period

Question 42

Post- Closing trial Balance

Answer 42

checks all debits equal credits and all temporary accounts have been closed

Question 43

Temporary (normal) accounts

Answer 43

Income statements that are closed to retained earnings at the end of an accounting period