Basics of Accounting Flashcards
What is a General Ledger?
A general ledger (GL) is a set of numbered accounts a business uses to keep track of its financial transactions and to prepare financial reports.
What is a GL account?
A general ledger account is an account or record used to sort, store and summarize a company’s transactions.
What is a Chart of Accounts?
A chart of accounts (COA) is an index of all of the financial accounts in a company’s general ledger. In short, it is an organizational tool that lists by category and line item all of the financial transactions that a company conducted during a specific accounting period.
What is Accounts Receivable?
Accounts receivable (AR) are the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers. Accounts receivable are listed on the balance sheet as a current asset. Any amount of money owed by customers for purchases made on credit is AR.
What is Accounts Payable?
Accounts payable (AP) represents the amount that a company owes to its creditors and suppliers (also referred to as a current liability account). Accounts payable is recorded on the balance sheet under current liabilities.
What is an Asset?
Property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.
What is a Balance Sheet used for?
A balance sheet is a financial statement that reports a company’s assets, liabilities, and shareholder equity at a specific point in time.
What is a Cash Flow Statement used for?
A cash flow statement is a financial statement that shows how cash entered and exited a company during an accounting period.
What is an Income Statement used for?
(aka - Profit and Loss statement, P&L)
An income statement is a financial statement that shows you the company’s income and expenditures. It also shows whether a company is making profit or loss for a given period. The income statement, along with balance sheet and cash flow statement, helps you understand the financial health of your business.
How do you calculate P&L?
A profit and loss statement is calculated by totaling all of a business’s revenue sources and subtracting from that all the business’s expenses that are related to revenue. The profit and loss statement, also called an income statement, details a company’s financial performance for a specific period of time.
Is a Balance Sheet based on a moment in time or a period of time?
Moment in time
Is a P&L based on a moment in time or a period of time?
Period of time
Is a Cash Flow statement based on a moment in time or a period of time?
Period of time
What are Debits and Credits?
Debits and credits are terms used by bookkeepers and accountants when recording transactions in the accounting records. The amount in every transaction must be entered in one account as a debit (left side of the account) and in another account as a credit (right side of the account). This double-entry system provides accuracy in the accounting records and financial statements.
Which side are Debits on?
Left
