f/a ch3 terms

  1. Accounting cycle
    • The sequence of steps that occurs in the recording and reporting of events
    • in the accounting system.
  2. Accumulated amortization
    • The total amount of amortization that has been taken on an asset, to a
    • particular point in time.
  3. Accumulated other comprehensive income
    • A component of shareholders' equity representing the cumulative
    • amount of unrealized increases and decreases in the values of the net assets of
    • an enterprise. Once realized, these gains and losses are transferred to retained
    • earnings.
  4. Adjusted trial balance
    • A listing of the account balances after the adjusting entries have been
    • made, but before the closing entries have been made.
  5. Adjusting entry
    • An entry made at the end of the period to record an event or transaction
    • that has not been recorded during the accounting period. Events or transactions
    • that are not signalled in any other way are recorded through adjusting entries.
  6. Chart of accounts
    A listing of the names of the accounts used in a particular accounting system.
  7. Classified balance sheet
    • A balance sheet in which the assets and liabilities sections are subdivided
    • into current (or short-term) and noncurrent (or long-term) items.
  8. Closing the books
    • The process by which a company makes closing entries to complete one
    • accounting period and set the balances in the temporary accounts to zero, in
    • preparation for the next period. The temporary accounts are closed into the
    • retained earnings account.
  9. Closing entries
    • Entries made at the end of the accounting period to transfer the balances
    • from the temporary income statement and dividend accounts to the retained
    • earnings account.
  10. Compound entry
    • A journal entry with more than two parts (i.e., multiple debits and/or
    • multiple credits). Of course, as with any journal entry, the total amount
    • debited must equal the total amount credited.
  11. Comprehensive income
    • The total change in the shareholders' equity (or net assets) of the
    • enterprise from nonowner sources. Includes net income as well as other
    • components, which generally represent unrealized gains and losses.
  12. Contra asset account
    • An account used to record reductions in a related asset account. An example
    • is accumulated amortization.
  13. Credit
    • A reference to the right side of an account, or an entry made to the right
    • side of an account.
  14. Debit
    • A reference to the left side of an account, or an entry made to the left
    • side of an account.
  15. Diluted earnings per share
    • An earnings per share calculation that shows what a company's basic earnings
    • per share could have been reduced to, if financial instruments such as
    • convertible debt or obligations such as employee stock options had caused more
    • common shares to be issued.
  16. Discontinued operations
    • Business operations that have been (or are being) phased out and will,
    • therefore, not continue in the future. They are reported separately on the
    • income statement.
  17. Double-entry accounting system
    • An accounting system that maintains the equality of the balance sheet
    • equation. Each entry requires that equal amounts of debits and credits be made.
  18. Earnings per share
    • A calculation in which income or earnings are divided by the
    • average number of common shares outstanding during the period.
  19. Extraordinary item
    • A gain or loss that meets three criteria: (1) it is unusual, (2) it is
    • infrequent, and (3) it is not caused primarily by a decision made by someone
    • inside the company. It is reported separately on the income statement.
  20. Future income tax
    • An asset or liability representing tax on the difference between the
    • accounting balance of assets/liabilities at a given point in time and the tax
    • balance of the same assets/liabilities. These differences arise when the
    • company uses one method for accounting purposes and a different method for tax
    • purposes.
  21. Gross margin
    Sales minus cost of goods sold. Synonym for gross profit.
  22. Gross profit
    Sales minus cost of goods sold. Synonym for gross margin.
  23. Income summary account
    • An account that is often used when closing the books, to summarize all the
    • temporary income statement accounts prior to their being closed to retained earnings.
  24. Income tax expense
    The expense for income taxes. A synonym for provision for taxes.
  25. Journal
    • A place where transactions and events are originally recorded in the
    • accounting system, in chronological order.
  26. Journal entry
    An entry made in a journal, to record a transaction or event.
  27. Ledger
    • A place where transactions and events are summarized in accounts. Entries
    • are transferred from the journal to the ledger by a process known as posting.
  28. Liquidity
    • A quality of an asset that describes how quickly it can be converted into
    • cash.
  29. Multi-step income statement
    • An income statement in which revenues and expenses from different types of
    • sources are shown in separate sections of the statement.
  30. Net-of-tax basis
    • The presentation of a gain or loss with the related income tax deducted from
    • it, to show the remaining amount, after tax.
  31. Other comprehensive income
    • Changes in net asset values representing unrealized gains and losses, which
    • are not included in net income but are included in comprehensive income.
  32. Permanent accounts
    • Accounts whose balances carry over from one period to the next. All balance
    • sheet accounts are permanent accounts.
  33. Post-closing trial balance
    • A trial balance prepared after the closing entries have been journalized and
    • posted to the accounts. Since all the temporary accounts have zero balances at
    • this point, it usually lists only the permanent accounts (whose balances are
    • carried forward into the next period).
  34. Posting the accounts
    • The process of transferring the information recorded in journal entries to
    • the ledger accounts. A synonym for posting to the ledger.
  35. Posting to the ledger
    • The process of transferring the information recorded in journal entries to
    • the ledger accounts. A synonym for posting the accounts.
  36. Provision for taxes
    The expense for income taxes. A synonym for income tax expense.
  37. Rules of debit and credit
    • For asset accounts, increases are recorded with debits and decreases with
    • credits; for liability and shareholders' equity accounts, increases are
    • recorded with credits and decreases with debits.
  38. Single-step income statement
    • An income statement in which all revenues are listed in one section and all
    • expenses (except income taxes, perhaps) are listed in a second section.
  39. Statement of comprehensive income
    • A statement showing net income plus other components of comprehensive
    • income, combined to produce the total comprehensive income.
  40. Synoptic journal
    • A journal in which transactions are recorded in a spreadsheet format. Each
    • account is assigned its own column, and amounts are added or subtracted inside
    • the columns.
  41. T account
    A device used to represent a ledger account in simplified form.
  42. Temporary accounts
    • Accounts used to keep track of information temporarily, during an accounting
    • period. Balances in these accounts are eventually transferred to a permanent
    • account, at the end of the period, using closing entries.
  43. Transaction analysis
    • The process by which an accountant decides what accounts are affected, and
    • by how much, by an economic transaction or event.
  44. Trial balance
    A listing of all the ledger account balances.
Card Set
f/a ch3 terms
terms to study