W02 vocab

Question 1

Account

Answer 1

Record showing increases and decreases to assets, liabilities, and equity found in the accounting equation

Question 2

Accounting cycle

Answer 2

Step-by-step process to record business activities and events to keep financial records up to date

Question 3

Book of original entry

Answer 3

Journal is often referred to as this because it is the place the information originally enters into the system

Question 4

Chart of accounts

Answer 4

Account numbering system that lists all the accounts a business uses in its day-to-day transactions

Question 5

Compound entry

Answer 5

More than one account is listed under the debit and/or credit column of a journal entry

Question 6

Contra account

Answer 6

Account that has a normal balance opposite of normal balance for the broad category to which the account belongs

Question 7

Contributed capital

Answer 7

Owner’s investment (cash and other assets) in the business which typically comes in the form of common stock

Question 8

Credit

Answer 8

Records financial information on the right side of an account

Question 9

Debit

Answer 9

Records financial information on the left side of each account

Question 10

Double entry accounting system

Answer 10

Requires the sum of the debits to equal the sum of the credits for each transaction

Question 11

Ending account balance

Answer 11

Difference between debits and credits for an account

Question 12

Expanded accounting equation

Answer 12

Breaks down the equity portion of the accounting equation into more detail to see the impact to equity from changes to revenues and expenses, and to owner investments and payouts

Question 13

General ledger

Answer 13

Comprehensive listing of all of a company’s accounts with their individual balances

Question 14

Journal

Answer 14

Record of all transactions

Question 15

Journalizing

Answer 15

Entering information into a journal; second step in the accounting cycle

Question 16

Normal balance

Answer 16

Expected balance each account type maintains, which is the side that increases

Question 17

Original source

Answer 17

Traceable record of information that contributes to the creation of a business transaction

Question 18

Period

Answer 18

One operating cycle of a business, which could be a month, quarter, or year

Question 19

Posting

Answer 19

Takes all transactions from the journal during a period and moves the information to a general ledger (ledger)

Question 20

Prepaid expenses

Answer 20

Items paid for in advance of their use

Question 21

Simple entry

Answer 21

Only one debit account and one credit account are listed under the debit and credit columns of a journal entry

Question 22

Stockholder’s equity

Answer 22

Owner (stockholder’s) investments in the business and earnings

Question 23

T-account

Answer 23

Graphic representation of a general ledger account in which each account is visually split into left and right sides

Question 24

Transaction

Answer 24

Business activity or event that has an effect on financial information presented on financial statements

Question 25

Trial balance

Answer 25

List of all accounts in the general ledger that have nonzero balances

Question 26

Unadjusted trial balance

Answer 26

Trial balance that includes accounts before they have been adjusted

Question 27

Unearned revenue

Answer 27

Advance payment for a product or service that has yet to be provided by the company; the transaction is a liability until the product or service is provided

Question 28

Accounting period

Answer 28

Breaks down company financial information into specific time spans and can cover a month, quarter, half-year, or full year

Question 29

Accrual

Answer 29

Type of adjusting entry that accumulates during a period, where an amount was previously unrecorded

Question 30

Accrued expense

Answer 30

Expense incurred in a period but not yet recorded, and no money has been paid

Question 31

Accrued revenue

Answer 31

Revenue earned in a period but not yet recorded, and no money has been collected.

Question 32

Adjusted trial balance

Answer 32

List of all accounts in the general ledger, including adjusting entries, which have nonzero balances.

Question 33

Adjusting entries

Answer 33

Update accounting records at the end of a period for any transactions that have not yet been recorded.

Question 34

Book value

Answer 34

Difference between the asset’s value (cost) and accumulated depreciation; also, value at which assets or liabilities are recorded in a company’s financial statements.

Question 35

Calendar year

Answer 35

Reports financial data from January 1 to December 31 of a specific year.

Question 36

Contra account

Answer 36

Account paired with another account type that has an opposite normal balance to the paired account; reduces or increases the balance in the paired account at the end of a period.

Question 37

Deferral

Answer 37

Prepaid expense and revenue accounts that have delayed recognition until they have been used or earned.

Question 38

Fiscal year

Answer 38

Twelve-month reporting cycle that can begin in any month, and records financial data for that twelvemonth consecutive period.

Question 39

Useful life

Answer 39

Time period over which an asset cost is allocated.

Question 40

Closing

Answer 40

Returning the account to a zero balance.

Question 41

Closing entry

Answer 41

Prepares a company for the next accounting period by clearing any outstanding balances in certain accounts that should not transfer over to the next period.

Question 42

Intangible asset

Answer 42

Asset with financial value but no physical presence; examples include copyrights, patents, goodwill, and trademarks.

Question 43

Operating cycle

Answer 43

Amount of time it takes a company to use its cash to provide a product or service and collect payment from the customer.

Question 44

Permanent (real) account

Answer 44

Account that transfers balances to the next period, and includes balance sheet accounts, such as assets, liabilities, and stockholder’s equity.

Question 45

Property, plant, and equipment

Answer 45

Tangible assets (those that have a physical presence) held for more than one operating cycle or one year, whichever is longer.

Question 46

Temporary (nominal) account

Answer 46

Account that is closed at the end of each accounting period, and includes income statement, dividends, and income summary accounts.