Accounting 201 Chapter 3 Key Terms

A systematic arrangement that shows the effect of transactions and other events on a specific element (asset, liability, and so on).  Companies keep a separate account for each asset, liability, revenue, and expense, and for capital (stockholders' equity).  Because of the format of an account often resembles the letter T, it is sometimes referred to as a T-account.

Collects and processes transaction data and then disseminates the financial information to interested parties.

Entries made at the end of an accounting period to bring all accounts up to date on an accrual basis, so that the company can prepare correct financial statements.

The formal process by which the enterprise reduces all nominal accounts to zero and determines and transfers the net income or net loss to a stockholder's equity account.  Also known as "closing the ledger", "closing the books", or merely closing.

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A company records the dual (two-sided) effect of each transaction in appropriate accounts.

A happening of consequence.  An event generally is the source or cause of changes in assets, liabilities, and equity.  Events may be external or internal.

Statements the reflect the collection, tabulation, and final summarization of the accounting data.  Four statements are involved (1) The balance sheet shows the financial condition of the enterprise at the end of the period.  (2) The income statement measures the results of operations during the period. (3) The statement of cash flows reports the cash provided and used by operating, investing, and financing activities during the period.  (4) the statement of retained earnings reconciles the balance of the retained earnings account from the beginning to the end of the period.

The "book of original entry" where the company initially records transactions and selected other events.  Various amounts are transferred from the book of original entry, the journal, to the ledger.  Entering transaction data in the journal is known as journalizing.

Entering transaction data in the journal

The book (or computer printouts) containing the accounts.  A general ledger is a collection of all the asset, liability, stockholders' equity, revenue, and expense accounts.

(temporary accounts) are revenue, expense, and dividend accounts; except for dividends, they appear on the income statement.

The process of transferring the essential facts and figures from the book of original entry to the ledger accounts.

Are asset, liability, and equity accounts; they appear on the balance sheet.

Contains the details related to a given general ledger account.

An external event involving a transfer or exchange between two or more entities.

The list of all open accounts in the ledger and their balances.  The trial balance taken immediately after all adjustments have been posted is called an adjusted trial balance.  A trial balance taken immediately after closing entries have been posted is called a post-closing (or after-closing) trial balance.  Companies may prepare a trial balance at any time.