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Flashcards in Ch 3 Deck (42):
1

Event

Happening of consequence

An event that is the source or cause of changes in assets, liabilities and equity.

May be internal or external

2

Transaction

External event involving transfer or exchange between 2 or more entities

3

Account

Shows effect of transactions and other events on specific element.
Separate account for each element

4

Real accounts

Permanent

Assets
Liabilities
Equity

On balance sheet

5

Nominal accounts

Temporary

Revenues
Expenses
Dividends

They all appear on income except for dividends

6

Ledger

General ledger is a collection of all asset liability equity revenue and expense accounts

7

Subsidiary ledgers

Contains details related to general ledger account

8

Journal

Book of original entry

Initially records transactions and selected other events

General journal lists transactions chronologically



Journalizing is entering transaction data in journal

9

Posting

Process of transferring essential facts and figures form book of original entry to ledger.

10

Trial balance

List of all open accounts in ledger and balances.

11

Adjusting engries

Made at the end of period to bring all accounts up to date on accrual basis so the financial statements can be made

12

Financial statements t

Balance
-- shows financial condition of enterprise at end of period

Income
--measures result of operations during period.

Statement of cash flows
--reports cash provided and used by operating investing and financing activities during period

Statement of retained earnings
--reconciles balance of etsinrd earnings account from beginning to end .

13

Closing

Close all temp accounts

14

Debits and credits do not mean

Increase or decrease but instead describe where a company makes entries in recording process

15

Double entry accounting

Company records dual effect of each transaction in appropriate accounts.

16

Accounting cycle

Oh 86

17

A transaction effects how many accounts?

Two or more

18

General journal entry consists of 4 parts

1. Accounts and amounts to be debited
2. ". " to be credited
3. Date
4. Explanation

19

Posting involves

1. In ledger, appropriate columns of accounts devoted, enter date, journal page and debit amount

2. In reference column of journal write the account number to which the debit amount was posted

3. " " same as 1 but credit

4. " " same as 2 but credit

20

The # in posting reference columns serves 2 purposes

1. Indicates ledger account # involved

2. Indicates completion of posting for particular item

21

Trial balance lists the accounts in?

The order they appear on ledger .

The balance of 2 columns must agree

22

What does the trial balance prove?

Equality of debits and credits after posting

23

What are the procedures for preparing trial balance?

1. List the account titles and balances in appropriate debit or credit column.

2. Total debit and credit columns

3. Provide equality of columns.

24

A trial balance does not prove what

That a company recorded all transactions or ledger is correct.

25

Use of adjusting entries make what possible?

Report on balance sheet the appropriate assets liabilities and equity at statement date

To report on income that proper revenues and expenses for period

26

The trial balance, the first pulling together of transaction data may not contain ho to date and complete data because?

1. Some events not recorded daily
2. Some costs are not recorded during period because costs expire
3. Some items may un recorded

27

Deferrals

Prepaid expenses
--expenses paid in cash before used or consumed

Unearned revenues
--cash received before services are performed

28

Accruals

Accrued revenues
--revenues for services performed but not yet received in cash or recorded

Accrued expenses
--expenses incurred by not yet paid in cash.

29

Depreciation

Process of allocating cost of an asset to expense over its useful life in a rational and systematic manner.

30

Depreciation is a?

Estimate rather than factual measurement of expired costs.

31

Contra asset account

Offsets an asset account on balance sheet.

32

Accumulated depreciation normal balance is?

Credit

33

Book value

Cost minus accumulated depreciation

34

Why does asset book value generally differ from fair value?

Depreciation is an allocation concept not a valuation concept.

35

Depreciation allocates

Assets cost to periods in which it is used.

36

What is the purpose of adjusted trial balance

Prove that credits = debits after all adjustments

37

Adjusted trial balance is the primary basis for

Preparation of financial statements

38

Post closing trial balance

Trial balance after closing.

39

Purpose of post closing trial balance?

Prove equality of permanent account balances that company carries forward into next accounting period.

40

Post closing trial balance includes only

Permanent (real) balance sheet accounts

41

Post closing trial balance provides evidence in

That company properly journalized and posted closing entries.

It shows the accounting equation is in balance at the end of accounting period.

42

Reversing entries

Is optional

Can be made at beginning of accounting period.

Exact opposite of adjusting journal entries made in previous periods