Accounting Vocab

Test 1

21 cards·by mtymeson

accounting

• Financial accounting

measure business activities of a company and communication of those measurements to external parties for decision-making purposes

• Auditors

trained individuals hired by a company as an independent party to express a professional opinion of the accuracy of that company’s financial

• Accrual-basis accounting

record revenue when we earn them and record expenses with related expenses, regardless of when cash is received or paid

• Cash basis accounting

record revenues at the time cash received and expenses at the time cash is paid

• Generally accepted accounting principles (GAAP)

the rules of financial accounting

• Revenue recognition principal

record revenue in the period in which we earn it

• Matching principal

recognizing expenses in the same period as the revenues they help generate

• Accounting Equation

equation that shows a company’s resources (assets) equal creditors’ and owners’ claims to those resources (liabilities and stockholders’ equ

• Assets

resources owned by a company

• Liabilities

amounts owed to creditors

• Stockholders’ Equity

owners’ claims to resources

• Revenues

the amounts earned from selling products or services to customers

• Expenses

the costs of providing products and services

• Net Income

the difference between revenues and expenses

• Account

summary of the effects of all transactions related to a particular item over a period of time

• Chart of accounts

a list of all account names used to record transactions of a company

• Operating cycle

the average time between purchasing or acquiring inventory and receiving cash proceeds from its sale

• General ledger

all accounts used to record the company’s transactions

• Journal

a chronological record of all transactions affecting a firm

• Posting

the process of transferring the debit and credit information from the journal to individual accounts in the general ledger

• Trial Balance

a list of all accounts and their balances at a particular date, showing the total debits and credits