vocabulary accounting

Question 1

Accounting

Answer 1

A system that collects and processes financial information about an organization and reports that information to decision makers.

Question 2

Accounting Entity

Answer 2

is the organization for which financial data are to be collected.

Question 3

Accounting Period

Answer 3

the time period covered by the financial statement.

Question 4

Audit

Answer 4

an examination of the financial reports to ensure that they represent what they claim and conform with GAAP

Question 5

Balance Sheet

Answer 5

reports the amount of assets/ liabilities/ and stockholders’ equity of an accounting entity at a point in time.

Question 6

Basic Accounting Equation

Answer 6

Assets = Liabilities + stockholders’ equity

Question 7

Financial Accounting Standards Board (FASB)

Answer 7

is the private sector body given the primary responsibility to work out the detailed rules that become generally accepted accounting principles.

Question 8

Generally Accepted Accounting Principles (GAAP)

Answer 8

are the measurement rules used to develop the information in financial statements

Question 9

Income Statement

Answer 9

reports the revenues less the expenses of the accounting period.

Question 10

Notes

Answer 10

provide supplemental information about the financial condition of a company without which the financial statements cannot be fully understood.

Question 11

Public Company Accounting Oversight Board (PCAOB)

Answer 11

the private sector body given the primary responsibility to issue detailed auditing standards.

Question 12

Securities and Exchange Commission (SEC)

Answer 12

the U.S. government agency that determines the financial statements that public companies must provide to stockholders and the measurement rules that they must use in producing those statements.

Question 13

Statement of Cash Flows

Answer 13

reports inflows and outflows of cash during the accounting period in the categories of operating/ investing/ and financing.

Question 14

Statement of retained Earnings

Answer 14

reports the way that net income and the distribution of dividends affected the financial position of the company during the accounting period.

Question 15

Account

Answer 15

a standardized format that organizations use to accumulate the dollar effect of transactions on each financial statement item

Question 16

Assets

Answer 16

are economic resources with probable future benefits owned by the entity as a result of past transactions.

Question 17

Conservatism

Answer 17

exception suggests that care should be taken not to overstate assets and revenues or understate liabilities and expenses.

Question 18

Continuity Assumption

Answer 18

states that businesses are assumed to continue to operate into the foreseeable future.

Question 19

Contributed Capital

Answer 19

results from owners providing cash to the business

Question 20

Credit

Answer 20

is on the right side of an account

Question 21

Current Assets

Answer 21

are assets that will be used or turned into cash within one year. inventory is always considered a current asset regardless of the time needed to produce and sell it.

Question 22

Current Liabilities

Answer 22

are obligations that will be settled by providing cash/ goods/ or services within the coming year

Question 23

Debit

Answer 23

is on the left side of an account

Question 24

Historical Cost Principle

Answer 24

requires assets to be recorded at historical cost-cash paid plus the current dollar value of all noncash considerations given on the date of exchange.

Question 25

Journal Entry

Answer 25

an accounting method for expressing the effects of a transaction on accounts in a debits-equal-credits format.

Question 26

Liabilities

Answer 26

are probable debts or obligations of the entity that results from past transactions / which will be paid with assets or services.

Question 27

Materiality

Answer 27

exception suggests that small amounts that are not likely to influence a user’s decision can be accounted for in the most cost-beneficial manner.

Question 28

Primary Objective of External Financial Reporting

Answer 28

is to provide useful economic information about a business to help external parties make sound financial decisions.

Question 29

Relevant Information

Answer 29

can influence a décision. timely and has predictive and or feedback value

Question 30

Retained Earnings

Answer 30

refers to the cumulative earnings of a company that are not distributed to the owners and are reinvested in the business

Question 31

Separate-Entity Assumption

Answer 31

states that business transactions are accounted for separately from the transactions of owners.

Question 32

Stockholders’ Equity

Answer 32

the financing provided by the owners and business operations

Question 33

T-account

Answer 33

is a tool for summarizing transaction effects for each account/ determining balances/ and drawing inferences about a company’s activities.

Question 34

Transaction Analysis

Answer 34

the process of studying a transaction to determine its economic effect on the business in terms of the accounting equation

Question 35

Unit-of-Measure Assumption

Answer 35

states that accounting information should be measured and reported in the national monetary unit.

Question 36

Accrual Basis Accounting

Answer 36

records revenues when earned and expenses when incurred/ regardless of the timing of cash receipts or payments

Question 37

Cash Basis Accounting

Answer 37

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

Question 38

Gains

Answer 38

increases in assets or decreases in liabilities from peripheral transactions.

Question 39

Losses

Answer 39

decreases in assets or increases in liabilities from peripheral transactions.

Question 40

Matching Principle

Answer 40

requires that expenses be recorded when incurred in earning revenue

Question 41

Operating Cycle

Answer 41

the time it takes for a company to pay cash to suppliers/ sell goods and services to customers/ and collect cash from customers.

Question 42

Revenues

Answer 42

increases in assets or settlements of liabilities from ongoing operations

Question 43

Time Period Assumption

Answer 43

indicates that the long life of a company can be reported in shorter time periods

Question 44

Accrued Expenses

Answer 44

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

Question 45

Accrued Revenues

Answer 45

previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and the related receivable account

Question 46

Adjusting Entries

Answer 46

entries necessary at the end of the accounting period to measure all revenues and expenses of that period

Question 47

Closing Entry

Answer 47

transfers balances in temporary accounts to retained earnings and establishes zero balances in temporary accounts

Question 48

Deferred Expenses

Answer 48

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

Question 49

Deferred Revenues

Answer 49

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

Question 50

Permanent Accounts

Answer 50

the balance sheet accounts that carry their ending balances into the next accounting period

Question 51

Post-Closing Trial Balance

Answer 51

should be prepared as the last step of the accounting cycle to check that debits equal credits and all temporary accounts have been closed.

Question 52

Temporary Accounts

Answer 52

income statement accounts that are closed to retained earnings at the end of the accounting period

Question 53

Trial Balance

Answer 53

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