Accounting

Question 1

Ledger

Answer 1

A ledger is a principal accounting record that provides a systematic and summarized view of a company’s financial transactions. It serves as the primary bookkeeping tool for recording and classifying accounting entries, facilitating the organization and tracking of financial activities.

Question 2

General ledger

Answer 2

Master set of accounts used to compile financial statements

Question 3

Journal entries

Answer 3

Recording transactions as debits and credits in accounting journals (ledgers)

Question 4

Accounts payable

Answer 4

Money owed to suppliers shown as a liability on the balance sheet

Question 5

Accounts receivable

Answer 5

Money owed by customers shown as an asset on the balance sheet

Question 6

Accrual accounting

Answer 6

Revenue and expenses are recorded when incurred regardless of cash flows (see cash accounting)

Question 7

Cash accounting

Answer 7

Revenue and expenses are recognized only when cash is received or paid. Reflects the company’s actual cash position. (see accrual accounting)

Question 8

Amortization

Answer 8

Allocating the cost of intangible assets over a period of time

Question 9

Book value

Answer 9

The net value of an asset calculated by original cost less depreciation/amortization

Question 10

Mark to Market (MTM)

Answer 10

An accounting practice that involves adjusting the value of an asset or liability to reflect its current market price. This adjustment is made regularly, typically at the end of each accounting period, and it reflects the fair market value of the asset or liability at that point in time.

Question 11

Capital expenditure

Answer 11

Spending to acquire or improve a long-term asset

Question 12

Cash basis accounting

Answer 12

Revenue and expenses are recorded when payment is received or made

Question 13

Cash flow statement

Answer 13

Shows sources and uses of cash via operating, investing and financing activities

Question 14

Cost of goods sold

Answer 14

Direct expenses related to producing/procuring goods sold by a company

Question 15

Credit

Answer 15

The right side of a ledger account, reflecting money owed or paid

Question 16

Debit

Answer 16

The left side of a ledger account, reflecting money received or owed

Question 17

Deferred revenue

Answer 17

Revenue received but not yet earned so recorded as a liability initially

Question 18

Depreciation

Answer 18

Allocating the cost of tangible assets over a period of time

Question 19

Double-entry accounting

Answer 19

Balancing debits and credits across ledger accounts for each transaction

Question 20

Fixed assets

Answer 20

Tangible property like buildings, equipment, and furniture used in business

Question 21

Income statement

Answer 21

Reports revenue, expenses, and profit/loss over a period of time

Question 22

Intangible assets

Answer 22

Nonphysical assets like patents, trademarks, copyrights, goodwill

Question 23

Inventory

Answer 23

Goods held available for sale by a company

Question 24

Liabilities

Answer 24

Debts or obligations owed by a company

Question 25

Overhead

Answer 25

Indirect operating expenses like rent and utilities not tied to production

Question 26

Prepaid expenses

Answer 26

Advanced payments for services to be received in the future

Question 27

Retained earnings

Answer 27

Accumulated net income retained for reinvestment in the business

Question 28

Revenue

Answer 28

Income generated by the regular activities of a business

Question 29

Trial balance

Answer 29

A listing of all open general ledger accounts with balances

Question 30

Variable costs

Answer 30

Expenses that fluctuate based on production volume

Question 31

Working capital

Answer 31

Current assets minus current liabilities, indicating operating liquidity

Question 32

Impairment

Answer 32

A long-term asset’s carrying value exceeds fair value requiring a write-down

Question 33

Days sales outstanding

Answer 33

Measure of average collection period for accounts receivable