designs the accounting information system and focuses on analyzing and interpreting documents
accountant
a system of gathering financial information about a business and reporting this information to users
accounting
looking at events that have taken place and thinking about how they affect the business
analyzing
generally supervises the work of accounting clerks, helps with daily accounting work, and summarizes accounting information
bookkeeper
the process in which accountants help managers develop a financial plan
budgeting
a public accountant who has met certain educational and experience requirements and has passed an examination
certified public accountant
a type of ownership structure in which stockholders own the business. the owner's risk is usually limited to their initial investment, and they usually have very little influence on the business decisions
corporation
procedures and guidelines developed by the financial accounting standards board to be followed in the accounting and reporting process
generally accepted accounting principles GAAP
a type of ownership structure in which more than one person owns the business
partnership
entering financial information about events affecting the company into the accounting system
recording
telling the results of the financial information
reporting
a business that provides a service
service business
a type of ownership structure in which one person owns the business
sole proprietorship
a separate record used to summarize changes in each asset, liability, and owner's equity of a business
account
accounting equation
assets=liabilities + owner's equity
an unwritten promise to pay a supplier for assets purchased or services received
accounts payable
an amount owed to a business by its customers as a result of the sale of goods or services
accounts receivable
an item that is owned by a business and will provide future benefits
asset
reports assets, liabilities, and owner's equity on a specific date-confirms the accounting equation is in balance
balance sheet
an individual, association, or organization that engages in economic activities and controls specific economic resources
business entity
the concept that nonbusiness assets and liabilities are not included in the business entity's accounting records
business entity concept
term for owner's equity
capital
transactions that reduce owner's equity
drawing
decrease in assets (or increase in liabilities) as a result of efforts to produce revenues
expenses
any accounting period of 12 months duration
fiscal year
reports the profitability of business operations for a specific period of time
income statement
something owed to another business entity
liability
another terms for owner's equity, amount by which the business assets exceed the liabilities
net worth
another name for the income statement
operating statement
amount by which business assets exceed the liabilities
owner's equity
another name for the income statement
profit and loss statement
amount a business charges customers for products sold or services performed
revenues
2 other names for the balance sheet
statement of financial condition AND statement of financial position
reports beginning capital plus net income less withdrawals to compute ending capital
statement of owner's equity
reduce owner's equity as a result of the owner taking out cash
withdrawals
the difference between the footings of an account
balance
to enter an amount on the right side of an account
credit
the normal balance of liability, owner's equity, and revenue accounts
credit balance
to enter an amount on the left side of an account
debit
the normal balance of asset, expense, and drawing accounts
debit balance
a system in which each transaction has a dual effect on the accounting elements
double-entry accounting
the total dollar amounts on the debit and credit sides of an account
footings
the side of an account that is increased
normal balance
a list of all accounts showing the title and balance of each account, used to prove that the sum of the debits equals the sum of the credits
trial balance
the book of original entry
journal
a complete set of all the accounts used by a business-accumulates a complete record of the debits and credits made to each account as a result of entries made in the journal
general ledger
a day-by-day listing of the transactions of the business
journal
entering the transactions in the journal
journalizing
copying the debits and credits from the journal to the ledger
posting
any document that provides information about a business transaction
source document
a list used to prove that the totals of the debit and credit balances in the ledger accounts are equal
trial balance
a method of accounting under which revenues are recorded when earned and expenses are recorded when incurred
accrual basis of accounting
journal entries made at the end of an accounting period to reflect changes in account balances that are not the direct result of an exchange with an outside party
adjusting entries
the difference between the asset account and its related accumulated depreciation account-the value reflected by the accounting records
book value
a method of accounting under which revenues are recorded when cash is received and expenses are recorded when cash is paid
cash basis of accounting
an account with a credit balance that is deducted from the related asset account on the balance sheet
contra-asset
the cost of an asset that is subject to depreciation
depreciable cost
a method of matching an asset's original cost against the revenues produced over its useful life
depreciation
a principle that requires assets to be recorded at their actual cost
historical cost principle
the amount an item can be sold for under normal economic conditions
market value
a principle that requires the matching of revenues earned during an accounting period with the expenses incurred to produce the revenues
matching principle
assets of a durable nature that will be used for operations over several years EX: building/equipment
plant assets
the expected market value of an asset at the end of its useful life
salvage value
a depreciation method in which the depreciable cost is divided by the estimated useful life
straight-line method
the difference between the asset account and its related accumulated depreciation account - aka book value
undepreciated cost
the period of time that an asset is expected to help produce revenues
useful life
the process of giving zero balances to the temporary accounts so that they can accumulate information for the next accounting period
closing process
cash and assets that will be converted into cash or consumed within either one year or the normal operating cycle of the business, whichever is longer
current assets
liabilities that are due within either one year or the normal operating cycle of the business, whichever is longer
current liabilities
a temporary account used in the closing process to summarize the effects of all revenue and expense accounts
income summary
assets such as property, plant, and equipment
long-term assets
obligations that are not expected to be paid within a year and do not require the use of current assets (2 terms)
long-term liabilities/long-term debts
accounts that accumulate information across accounting periods (reported on what document?)
permanent accounts-reported on the balance sheet
prepared after posting the closing entries to prove the equality of the debit and credit balances in the general ledger accounts
post-closing trial balance
accounts that do not accumulate information across accounting periods, but are closed such as drawing and all income statement accounts
temporary accounts