Accounting Vocabulary Flashcards

Terms Definitions
expenses + net income
Planning, recording, analyzing, and interpreting financial information
A record summarizing all the information pertaining to a single item in the accounting equation is called a(an)
What is Control?
Implementing decisions, monitoring, evaluating and responding.
perpetual inventory
Merchandise inventory determined by keeping a continuous record of increases, decreases, and balance on hand
maximum earning base for social security
a person or thing that vouches.
An ammount recorded on the right side
Administrative costs
costs required to manage the organization and provide staff support, including executive salaries, costs of data processing and legal costs
ability to compare info of different companies because they use the same accounting principles
business owned by two or more people
mixed, variable, or fixed cost? cost of water for corn fields
Accounting Number
The number assigned to an account
purchase invoice
a bill received for goods purchased
Transaction file
Contains records for the individual business transactions that occur during a specific fiscal period.
Absorption costing treats...
ALL manufacturing costs as product costs, regardless of their bahavior
Return on total assets
Ratio reflecting operating efficiency; defined as net income divided by average total assets for the period also called return on assets or return on investment
deferred income
income received but not yet earned is
Gross margin
The difference between net sales & cost of goods sold
pay period
the period covered by a salary payment
variable for the time it takes an attacker to break through the organization's preventive controls
A T-account
represents a ledger account and is used to understand the effects of one or more transactions.
Transaction Processing System (TPS)
Sales recording systems, accounts receivable and cash collection systems, and the inventory tracking systems
to record, summarize, and report sales transactions
Capital Expenditures Budget
Presents company's plan for purchasing property, plant, equipment, and other long term assets
Cash Basis Accounting
Method of accounting in which income is recorded when received and expenses are recorded when paid
amounts entered on the left side of an account
Bill of Materials
document that lists the type and quantity of each type of direct material needed to complete a unit of product.
the amount of revenue that must be realized for the firm to have neither profit nor loss
break-even definition
gross profit on sales
revenue remaining after cost of merchandise sold has been deducted
purchase discount
term used by customer to describe cash discount granted to purchaser for paying within discount period
What is income?
measure of the increase in the "wealth" of an entity over a period of time

accountants have agreed on a common set of rules for measuring income so all decision makers can easily compare performance of one company to another
a petty cash on hand amount that is more than a recorded amount
Cash Over
perpetual inventory system
detailed records of the cost of each inventory purchase and sale are maintained. cost of goods sold is determined each time a sale occurs
amount owner's took out of their own pockets and put into the company
Trial Balance
a proof of the equality of credits and debits in a general journal.
What is the most popular time period for measuring incomeor profits?
the calendar year
Event 1: Investment of cash by stockholders
assets increase (cash)
SE increase (common stock)
Lower Cost or Market
This is done by valuing the inventory in the period in which the price decline occurs. It is an example of the accounting concept of conservation, which mean that the best choice among accounting alternatives is the method that is least likely to overstate assets and net income.
direct or raw materials
those materials that go into the final product and can be physically traced to it; one companies finished product can become another companys raw materia
What is Damaged/Obsolete? and what is it also known as?
~ Damages and obsolete (and deteriorated) goods that are not counted in inventory if they cannot be sold~ A.K.A "Net Realizable Value"
Step 1: Find Purchases (look at inventory)
ending inv = beg inv + purch - cogs 
Step 2: Find Price Paid for Inventory (look at A/P)
ending a/p = beg a/p + purch - cash paid
Two step approach to calculate cash paid for inventory
(name 2 steps)
(write equations) 
should we close during the off season
there is no def. answer; depends on businesses fixed costs, additional clsoe down & start up costs that are included in calculation of the cost of closing
a group of accounts
transferring information from a journal entry to a ledger account
accounts receivable
asset, balance sheet, debit
Goods that a merchandising business purchases to sell.
increase of assets or expenses, decreases of liability, equity, or income
Temporary Accounts
accounts used to accumulate information until it is transferred to the owner's capital account
moneys owed; debts or pecuniary obligations (
A decrease in owner's equity resulting from the operation of a business
financial budgets
budgets of financial resources, such as the cash budget and the budgeted balance sheet.
principles of cash management
increase collection receivables
keep inventory low
delay payment of liabilities
plan timing of major expenditures
invest idle cash
T account
an efficient tool for using double-entry accounting
net loss
expenses exceed net sales you have
Adjusting Entries
Journal entries recorded to update general ledger accounts at the end of a fiscal period.
Six different actuarial methods allowed
annual required contributions
IS under IFRS includes
-current service cost
-interest cost
-expected return on plan assets
-past service costs
-effect of settlement or curtailment
-actuarial gains and losses
report form
A balance sheet format that lists classifications one under another.
step 3
make the Income summary account equal zero via the Retained earnings account. This closing entry transfers net income (or net loss) to Retained earnings.
form on which a short message is written describing a transaction
Debit & credit
Double entry bookkeeping means an entry is made as a
Terminal Summary
The report that summarizes the cash and credit card sales of a point-of-sale terminal.
Financial rights to the assets of a business
attempt social engineering
trick someone to let you in
Revenue (net sales)
from selling merchandise minus the cost of goods sold (the expense of buying and preparing the merchandise) to customers is called gross profit (also called gross margin). This amount minus expenses (generally called operating expenses) determines the net income or loss for the period.
Owner’s Equity
The residual interest in the assets of a business entity that remains after deducting the entity’s liabilities. Also called residual equity or stockholder’s equity.
29. The account to which the drawing account is closed is called
a. Revenue
b. Income Summary
c. Capital
d. Cash
e. none of the above
Internal User
managers who plan, organize and run a buisness. These include marketing managers, production, supervisors finance directors and company officers.
Sales Slip
Form that lists the details of a sale
accumulated earnings
the employee's year- to - date gross earnings..
terms of sale
An agreement between a buyer and seller about payment for merchandise
Subsidiary Ledger
A ledger that is summarized in a single general ledger account.
The process of allocating the cost of a plant asset to expense over its life is:
A) amortization.
B) depletion.
C) matching.
D) depreciation.
D) depreciation
Intangible benefits -
include increase quality, safety, and loyalty or conservative approach
What are the key components for measuring income?
revenues and expenses
general amount column
A journal amount column that is not headed with an account title
Maturity date
The date on which the face value must be repaid to the creditor.
Aging of Account Receivable
A schedule in which it classifies customer balances by the length of time they have been unpaid.
What are unrecorded expenses?
1) payment of wages
2) accrual of wages
3) accrual of interest
4) accrual of income taxes
Debit cash, Credit accounts receivable
If a funeral director receives payment from a client who had purchased a service on a 30 day account, he would make which of the following entries in his journal
Merchandising Inventory
The goods on hand at any one time that are available for sale to customers
degree of operating leverage
cont margin/ net op income - measurese how a % change in sales volume will effect profits at a given level of sales
At the beginning of 2009, Bella Company had office supplies inventory of $500. During 2009, the company purchased office supplies amounting to $2,500 (paid for in cash and debited to office supplies inventory). At December 31, 2009, the end of the account
credit to office supplies inventory for $2,200.
Income Statement When Using the Perpetual Inventory System
The Cost of Goods Sold account is continually updated during the accounting periodThe Merchandise Inventory account on the balance sheet is updated at the same time
1. 15M + 46M = 61M
2. 4,464,000,000 - 61M = 4,403,000,000
Record using the % of sales principle:
PepsiCo. has sales of $46M. A/R=4,464,000,000, and an allowance of 15,000,000.
end of month
Value added time
Process time
communicating results results are communicated in the form of financial statements
recording transactions in a journal
Inventory not owned by retailer
Investing Activities
-Changes into long term assets
-Long Term investments
to grow or accumulate over time
Supplementary Records
Information outside the usual accounting records; also called supplemental records
Current Liabilities
Accoutns payable, notes payable, accrued liabilities, and unearned revenue are examples of ______ liabilities.
The income statement includes changes in owner's equity resulting from investments or withdrawals of assets by the owner.
Expense created by allocating the cost of plant and equipment to periods in which they are used; represents the expense of using the asset.
file maintenance
the procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current
The convention that refers to the relative importance of an item or event in a financial statement and its influence on the decisions of the users of financial statements.
Weighted average Method
Total cost / total units
a form of recording transactions in chronological order
General Ledger
contains all the assets, liabilities, stock Equity, revenue, and expense accounts. 
Can you use cash when adjusting entry?
Variable cost
changes in total dollars as volume changes; as volume increases, total VC increases (same for decreasing); when expressed on a per unit basic VC stays the same
contra account
an account that reduces a related account on a financial statement
Proving Cash
Determining that the amount of cash agrees with the accounting records
Voiding a check
indicates an error on the check
Gross Pay
Total earnings for a payroll period, includes bonuses and overtime pay
activity based costing
an accounting framework based on determining the cost of activities and allocating these costs to products using activity rates
Merchandising business
A business that purchases and sells goods
Historical COst
report inventory at price paid when purchased
Sales Discounts
from the sellers pov discounts that a seller may ofer the buyer for early payment
Revenue Recognition Principle
Recording revenue when you earn it. (for sale of goods, when good is delivered or customer takes possession)
every transaction has two sides;
YOU give something
YOU receive something
Wholesale Merchandising Business
a business that buys and resells merchandise to retail merchandising businesses.
Bearer Bonds (Unregistered Bonds)
Bonds payable to whoever holds them
Wholesale Merchandsing Business
buys and resells merchandise to retail businesses
Subgrantee reporting; proprietory funds:
nonoperating rev or contributed equity (if restricted capital grant)
Primary key
data field that is used to unquely identify each record.
Plant-wide rate
the use of one rate for the entire company when allocating capacity costs (overhead) to products
Plant Assets
Assets that will be used for a number of years in the operation of a business.
Pro Forma Financial Statements
Statements that show the effects of proposed transactions and events as if they had occurred.
Accrued expenses
refer to costs that are incurred in a period but are both unpaid and unrecorded.
Cardinality between Sale and Shipment
Sale 0:N Shipment 1:N
2 event entities
Each sale relates to a minimum of Zero shipments and a maximum of many shipments. When you have a time lag, or the item is backordered you have a sale, but no shipment. but many because a customer can order 2 different items in one sale but it gets shipped at different times. Also it can apply to different items from different departmetns.
sarbanes-oxley act of 2002 (sox)
law passed by congress in 2002 intended to reduce unethical corporate behavior
Accounting and Reporting for Merchandising Purchases and Sales –
Both GAAP and IFRS include similar guidance in accounting for merchandise purchases and sales. All of the transactions presented in this chapter, including the closing process, are accounted for identically under the two systems.
What's yield rate?
the return you get on a bond.
When you buy a bond at par, yield is equal to the interest rate. When the price changes, so does the yield.
The steps in the accounting (or sequence of steps followed in the accounting system) are as follows:
1. analyze - business transactions from source documents
2. Recod - the transactions by entering them in the general journal
3. Post - the journal entries to the ledger, and prepare a trail balance
4. Adjust- the accounts, and prepare an adjusted trail balance
5. Prepare - financial statements
6. Close - the accounts, and prepare a post-closing trail balance
Cedar fair sold a hotel for 3,000,000 cash at the end of it's 16th year of use. The hotel originally cost 20,000,000, and was depreciated using the straight-line method with zero residual value and a useful life of 20 years.
Prepare journal entry to recor
dr. Cash. 3,000,000
dr. Acc. Depre. 16,000,000
dr. Loss on disposal. 1,000,000
Cr. Buildings 20,000,000
What is different about bonds from term loans?
Bonds are registered with SEC and they are a public offering
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