accounting 201

The flashcards below were created by user nickgame808 on FreezingBlue Flashcards.

  1. equation for net sales
    sales- sales discount-sales return and allowances=net sales
  2. equation for cost of goods available for sale
    beginning inventory+ net cost of purchases= cost of goods available for sale
  3. equation for net cost of purchases
    purchases- purchase discounts-purchase returns and alllowances+freight in= net cost of purchases
  4. equation for cost of goods sold
    cost of goods available for sale- ending merchandise= cost of goods sold
  5. periodic inventory system
    physical count of inventory
  6. perpetual inventory system
    computerized record of merchandise inventory
  7. weighted average equation
    cost of goods available for sale/ number of units available= weighted average cost per unit
  8. journalizing
    debiting one account and crediting another
  9. fiscal year
    period used for calculating yearly financial statements in businesses and other organizations
  10. income summary
    ledger account used in the closing stage of the account cycle, temporary
  11. cost principle
    goods and services should be recorded at their historical costs not current value
  12. monetary unit assumption
    the dollar is stable, it does not lose its purchasing power
  13. double entry bookkeeping
    every entry into an account requires a corresponding and opposite entry to a different account
  14. time period assumption
    divides ongoing activities in a business into periods of a year, quarterly, monthly, and weekly
  15. list of assets
    • cash 
    • accounts receivable 
    • notes receivable
    • prepaid expense
    • equipment, furniture, fixtures
    • building
    • land
  16. list of liabilities
    • accounts payable
    • notes payable
    • accrued liability
    • unearned revenue
  17. stockholders equity
    • common stock- increases
    • dividends- decreases
    • revenues - increases
    • expenses- decreases
  18. account
    detailed record of all increases and decreases that have occurred in an account during a specific period
  19. chart of accounts
    used to organize a company's accounts
  20. ledger
    record holding of all of the accounts of a business, the changes in the accounts, and their balances
  21. double entry system
    used to record dual effects of each transaction
  22. journal
    record of the transaction in date order
  23. posting
    transferring data from the journal to the ledger
  24. trial balance
    summary of the ledger listing all of the accounts with their balances
  25. cash basis accounting
    • revenue is recorded when earned
    • expenses are recorded when paid
    • not allowed under gaap
  26. accrual basis accounting
    • revenue is recorded when earned 
    • expenses are recorded when cash is paid
    • used by most businesses
  27. revenue recognition principle
    • dictates when to record revenue and the amount of revenue to record
    • record revenue when earned
    • might be different from cash collections revenue is based on the actual selling price of the items or service
  28. matching principle
    • guides account for expenses
    • expenses are recorded when they are incurred during the period
    • expenses are matched against the revenue of the period
  29. 2 types of adjusting journal entries
    deferrels and accuals
  30. types of deferred expenses
    • prepaid rent
    • office supplies
    • depreciation
  31. what is deferred revenue?
    • occurs when a company receives cash before it does the work or delivers a product
    • considered a liability
  32. accrued expenses
    expenses a business has incurred but not yet paid
  33. types of accrued expenses
    • salaries 
    • interest
    • utilities
  34. accrued revenue
    • performed a service but has not yet collected cash
    • -debit to accounts receivable
    • -credit to service revenue
  35. adjusted trial balance
    • a summary of all accounts with adjusted balances
    • ensure total debits equal total credits
    • ensures balance sheet items are properly valued
  36. 3 parts of financial statements
    • income statement
    • statement of retained earnings
    • balance sheet
  37. income statement
    reports revenue and expenses and calculates net income or net loss for the period
  38. statement of retained earnings
    shows how retained earnings changed during the period
  39. balance sheets
    reports assets, liabilities, and stockholders equity as of the last day of the period
  40. closing processes
    zeros out all revenues and expense accounts in order to measure each periods net income separately from all other periods
  41. corporation
    • business owned under state law, separate legal entity 
    • stockholder ownership
    • life span is indefinite
  42. equation for income statement
    revenues-expenses=net income or net loss
  43. statement of retained earnings
    (beginning+net income or -net loss)- dividends for the period= retained earnings
  44. accounting
    • an information system that
    • -measures business activity 
    • -processes the information into reports
    • -communicates the results to decision makers
  45. internal accounting
    • (managerial accounting)
    • 1. how much money does the business budget for production?
    • 2. should the business expand to a new location?
    • 3. how do actual costs compare to budgeted costs?
  46. external accounting
    • (financial accounting)
    • 1.should I invest in a business?
    • 2.Is the business profitable?
    • 3.should we lend money to the business?
    • 4.can the business pay us back?
  47. GAAP
    • generally accepted accounting principles
    • -relevent
    • -faithfully representative
  48. economic entity assumption
    an organization that stands apart as a separate economic unit
  49. 5 steps on how to close accounts
    • 1. expenses put in left side of income summary
    • 2. revenues put in right side of income summary
    • 3. take end balance of income summary and put it in right side of retained earnings
    • 4. dividends in left side of retained earnings
    • 5. find ending balance of retained earngings
  50. post closing trial balnce
    • a list of all the accounts and their balances at the end of the period after journalizing and posting the closing entries
    • includes only permanent accounts
Card Set
accounting 201
Show Answers