Ch 2 Accounting Information System

Question 1

accounting information system

Answer 1

collects and processes transaction data and communicates financial information to decision makers

Question 2

general ledger accounting systems

Answer 2

software programs that integrate the various accounting functions related to sales, purchases, receivables, payables, cash receipts and disbursements, and payroll

Question 3

entry-level programs

Answer 3

companies with revenue of <$5 million and up to 20 employees

Question 4

enterprise resource planning (ERP) systems

Answer 4

typically used by manufacturing companies with more than 500 employees and $500 million sales

Question 5

manual accounting systems

Answer 5

someone performs each of the steps in the accounting cycle by hand

Question 6

robotic process automation (RPA) systems

Answer 6

designed to be user-friendly and help companies create efficiencies in their business processes

Question 7

debit

Answer 7

left

Question 8

credit

Answer 8

right

Question 9

double-entry accounting

Answer 9

a company records the dual (two-sided) effect of each transaction in appropriate accounts

Question 10

accounting cycle

Answer 10

the procedures that companies use to record transactions and prepare financial statements

Question 11

transactions

Answer 11

a business’s economic events recorded by accountants

Question 12

external transactions

Answer 12

involves economic events between the company and some outside enterprise

Question 13

internal transactions

Answer 13

economic events that occur entirely within one company

Question 14

journal

Answer 14

the book of original entry

Question 15

general journal

Answer 15

the most basic form of a journal

Question 16

journalizing

Answer 16

entering transaction data in the journal

Question 17

general ledger

Answer 17

contains all the assets, liabilities, and stockholders equity accounts

Question 18

chart of accounts

Answer 18

lists the accounts and the account numbers that identify their location in the ledger

Question 19

trial balance

Answer 19

a list of accounts and their balances at a given time

Question 20

adjusting entries

Answer 20

ensure that a company follows the revenue recognition and expense recognition principles

Question 21

deferrals

Answer 21

expenses or revenues that are recognized at a date later than the point when cash was originally exchanged

Question 22

prepaid expenses

Answer 22

assets paid for and recorded before a company uses them

Question 23

depreciation

Answer 23

the process of expensing (allocating) the cost of an asset over its useful life in a rational and systematic manner

Question 24

contra asset account

Answer 24

offsets an asset account on the balance sheet

Question 25

book value

Answer 25

the difference between its cost and its related accumulated depreciation

Question 26

unearned revenues

Answer 26

when companies receive cash before services are performed, they record a liability by increasing a liability account called

Question 27

accrued revenues

Answer 27

revenues for services performed but not yet recorded at the statement date

Question 28

accrued expenses

Answer 28

expenses incurred but not yet paid or recorded at the statement date

Question 29

adjusted trial balance

Answer 29

proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments

Question 30

closing process

Answer 30

reduces the balance of nominal (temporary) accounts to zero in order to prepare the accounts for the next period's transactions

Question 31

closing entries

Answer 31

prepared at the end of a company's annual accounting period

Question 32

post-closing trial balance

Answer 32

the trial balance after closing

Question 33

reversing entry

Answer 33

the exact opposite of the adjusting entry made in the previous period

Question 34

income statement

Answer 34

classifies amounts into such categories as gross profit on sales, income from operations, income before taxes, and net income

Question 35

retained earnings statement

Answer 35

reconciles the balance of the retained earnings account from the beginning to the end of the period

Question 36

balance sheet

Answer 36

shows the financial condition of a company at the end of a period

Question 37

accrual-basis accounting

Answer 37

recognizes revenue when the performance obligation is satisfied and expenses in the period incurred, without regard to the time of receipt or payment of cash

Question 38

strict cash basis

Answer 38

companies record revenue only when they receive cash

Question 39

modified cash basis

Answer 39

a mixture of the cash basis and the accrual basis

Question 40

ledger

Answer 40

the entire group of accounts maintained by a company

Question 41

useful life

Answer 41

length/term of service