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42 Cards in this Set
- Front
- Back
What are the 3 steps of Accounting?
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Indentify, Record, and Communicate
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Who are the origins of accounting attributed to?
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Luca Pacioli (an Italian Renaissance Mathematician)
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Accounting v Bookkeeping
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The accounting process includes the bookkeeping function, but bookkeeping usually only involves the recording of economic events.
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Ethics
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the standards of conduct by which one's actions are judged as right or wrong, honest or dishonest, fair or not fair
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GAAP
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Generally Accepted Accounting Principles are common standards that indicate how to report economic events
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FASB
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The Financial Accounting Standards Board is a private organization that establishes generally accepted accounting principles (GAAP)
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SEC
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Security and Exchange Commission is a governmental agency that requires companies to file financial reports in accordance with generally accepted accounting principles.
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Cost Principle
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An accounting principle that states that assets should be recorded at their cost.
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Monetary Assumption
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An assumption stating that only transaction data that can be expressed in terms of money be included in the accounting records - the unit of measure remains sufficiently constant over time
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Economic Entity Assumption
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An assumption that requires that the activities of the entity be kept separate and distinct from the activities of its owners and all other economic entities
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Proprietorship
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A business owned by one person, therefore personally liable
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Partnership
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An association of two or more persons to carry on as co-owners of a business for profit; must separate own lives from business
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Corporation
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A business organized as a separate legal entity under state corporation law having ownership divided into transferable shares of stock
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Assets
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Resources owned by a business
Consists of: Cash, Accounts Receivable, Supplies, Insurance, and Equipment Normal Balance is Debit |
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Liabilities
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Creditorship claims on assets
Consists of: Notes Payable, Accounts Payable, Unearned Revenue Normal Balance is Credit |
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Stockholders' Equity
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The ownership claim on total assets of a corporation
Consists of accounts: Common Stock, Retained Earnings, and Dividends Normal balance is Credit |
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Retained Earnings
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are determined by revenues, expenses, and dividends
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Revenues
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The gross increase in stockholders' equity resulting from business activities entered into for the purpose of earning income
Normal Balance is credit |
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Expenses
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The cost of assets consumed or services used in the process of earning revenue
Ex: advertising, insurance, salaries, and rent Normal balance is Debit |
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Net Income
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the amount by which revenues exceed expenses
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Net loss
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the amount by which expenses exceed revenues
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Dividend
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a distribution by a corporation to its stockholders on an equal (pro rata) basis
Normal Balance is Debit |
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Transactions
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the economic events of the enterprise that are recorded by accountants
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Income Statement
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A financial statement that presents the revenues and expenses and resulting net income or net loss of a company for a specific period of time
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Retained Earnings Statement
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A financial statement that summarizes the changes in retained earnings for a specific period of time
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Balance Sheet
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A financial statement that reports the assets, liabilities, and stockholders' equity at a specific date
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Statement of Cash Flows
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A financial statement that provides imformation about he cash inflows (receipts) and cash outflows (payments) of an entity for a specific period of time
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Auditing
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the examination of financial statements by a certified public accountant in order to express an opinion as to the fairness of presentation
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Management Consulting
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An area of public accounting involving financial planning and control and the development of accounting and computer systems
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Examples of Public Accounting include:
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auditing, taxation, and management consulting
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Examples of Private Accounting include:
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General accounting, cost accounting, budgeting, accounting information systems, tax accounting, internal auditing
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Account
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a record of increases and decreases in specific asset, liability, or stockholders' equity items
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Debit
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the left side
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Credit
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the right side
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3 Steps in the Recording Process:
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1. analyze each transaction for its effects on the accounts
2. enter the transaction info in a journal 3. transfer the journal info to the appropriate accounts in the ledger |
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Journal
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An accounting record in which transactions are initially recorded in chronological order
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Journalizing
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the entering of transaction data in the journal
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Ledger
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the entire group of accounts maintained by a company
- it keeps in one place all the information about changes in specific account balances |
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General Ledger
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a ledger that contains all asset, liability, and stockholders' equity accounts
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Posting
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the procedure of transferring journal entries to the ledger accounts
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Chart of Accounts
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a list of accounts and the account numbers that identify their location in the ledger
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Trial Balance
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a list of accounts and their balances at a given time
- primary purpose is to prove that the debis equal the credits after posting - uncovers errors in journalizing and posting and is useful in preparing financial statements |