Account
A systematic arrangement that shows the effect of transactions and other events on a specific element (asset, liability, and so on). Companies keep a separate account for each asset, liability, revenue, and expense, and for capital (stockholders' equity).
accounting cycle
Standard set of accounting procedures to record transactions and prepare financial statements.
accrual basis
The recognition of revenue when it is earned, and the expenses in the period incurred, without regard to the time of receipt or payment of cash.
adjusted trial balance
A trial balance prepared from a company's ledger accounts after journalizing and posting all adjusting entries. It shows the effects of all financial events that occurred during the accounting period.
adjusting entry
Adjustments made at the end of the accounting period to ensure that a company has recorded revenues in the period in which it earns them and recognized expenses in the period in which it incurs them�in other words, that it has followed the revenue recogni
closing entries
Journal entries made at the end of a company's annual accounting period to transfer the balances of temporary accounts to a permanent owners' equity account (retained earnings or a capital account, depending on the company's form of organization).
Event
A happening of consequence, which generally is the source or cause of changes in assets, liabilities, and equity. Events may be external or internal.
general journal
A complete record of a company's transactions or other financial events, listed chronologically and expressed in terms of debits and credits made to accounts.
general ledger
A list of all of a company's asset, liability, stockholders' equity, revenue, and expense accounts.
Journal
The "book of original entry" where the company initially records transactions and selected other events. The company transfers that information from the journal to the ledger.
Ledger
The book (or computer printouts) containing the accounts. A general ledger is a collection of all the asset, liability, owners' (stockholders') equity, revenue, and expense accounts. A subsidiary ledger contains the details related to a given general ledg
modified cash basis
A mixture of the accrual basis and cash basis, with modifications that have substantial support, such as capitalizing and depreciating plant assets or recording inventory.
Posting
The process of transferring the essential facts and figures from the book of original entry (the journal) to the ledger accounts, using debits and credits made to accounts.
prepaid expenses
Assets paid for and recorded before a company uses them. Prepaid expenses expire either with the passage of time (e.g., rent and insurance) or through use and consumption (e.g., supplies). Companies typically recognize prepaid expenses by making adjusting
reversing entries
Journal entries, made at the beginning of the next accounting period, that are the exact opposite of the adjusting entries made in the previous period. Making reversing entries is an optional step in the accounting cycle.
statement of cash flows
Financial statement that reports the cash provided and used by operating, investing, and financing activities during the period.
statement of retained earnings
Financial statement that reconciles the balance of the retained earnings account from the beginning to the end of the period.
strict cash basis
Companies record only when they receive cash, and they record expenses only when they disburse cash.
Transaction
An external event involving a transfer or exchange between two or more entities.
Worksheet
An informal device for accumulating and sorting information needed for the financial statements. The worksheet typically provides columns for the first trial balance, adjustments, adjusted trial balance, income statement, and balance sheet. Completing the
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accumulated other comprehensive income
An entry in the stockholders' equity section of the balance sheet that reports the cumulative amounts of Other Comprehensive Income. Other Comprehensive Income measures the amounts of all gains and losses in a period that bypass the income statement but a
appropriated retained earnings
A retained earnings account that is restricted for a specific use, usually to comply with contractual requirements, board of directors' policy, or current necessity.
capital maintenance approach
An income measurement approach in which a company determines income for the period based on the change in equity, after adjusting for capital contributions or distributions (dividends). An alternative to the transaction approach for income measurement.
changes in estimates
Adjustments or changes that companies must make because financial circumstances did not turn out as expected. Companies account for changes in estimates in the period of change if they affect only that period, or in the period of change and future periods
comprehensive income
Income measure that includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income includes: all revenues and gains, expenses and losses reported in net income, and all ga
current operating performance approach
Income-reporting approach that advocates reporting only regular and recurring revenue and expense elements, but not irregular items, in income.
discontinued operation
Occurs for a company when two things happen: (1) a company eliminates the results of operations and cash flows of a component from its ongoing operations, and (2) there is no significant continuing involvement in that component after the disposal transact
earnings management
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in earnings.
earnings per share (EPS)
A distilled and important income figure, calculated as net income minus preferred dividends (income available to common stockholders), divided by the weighted average of common shares outstanding. Companies must disclose earnings per share on the face of
extraordinary items
Nonrecurring material items that differ significantly from a company's typical business activities. They are distinguished by their unusual nature and by the infrequency of their occurrence.
income statement
The financial report that measures the success of company operations for a given period of time. It is also often called the statement of income or statement of earnings.
intraperiod tax allocation
Reporting of irregular items within an accounting period on the income statement or statement of retained earnings net of tax. Such allocation relates the income tax expense of the fiscal period to the specific items that give rise to the amount of the ta
irregular items
Income-statement components for which the FASB has established special reporting rules. These items fall into six general categories: (1) discontinued operations, (2) extraordinary items, (3) unusual gains and losses, (4) changes in accounting principle,
modified all-inclusive concept
Approach, adopted by the accounting profession, that dictates that companies record just about all items, including irregular ones, as part of net income, and that companies must highlight irregular items in the financial statements.
multiple-step income statement
Income statement format that separates operating transactions from nonoperating transactions, and matches costs and expenses with related revenues. It highlights certain intermediate components of income that analysts use to compute ratios for assessing t
other comprehensive income
Measure of the amounts of all gains and losses in a period that bypass the income statement but affect stockholders' equity. These amounts arise from such items as unrealized gains or losses on certain investments and unrealized gains and losses on certai
quality of earnings
The extent to which earnings is useful to investors and creditors in making resource allocation decisions, generally in terms of predicting future earnings and cash flows. Thus, higher quality earnings exhibit higher levels of relevance and reliability. A
transaction approach
Method of income measurement that focuses on the income-related activities�revenue, expense, gain, and loss transactions�that have occurred during the period.
How to determine interest with just payable and note base
Determine the length that the payable has ran for and get a single month number. Once you have done that multiple by 12 months to get the annual amount of interest payable. Then divide that number by the principle and you get your annual interest rate.
If the company paid $17,500 in salaries in 2010, what was the balance in Salaries Payable on December 31, 2009? Salaries Expense is 12858 & Salaries Payable is 1453 in 2010. Solve.
17500+1453-12858
List off the Multistep income statement up until Income from Continuing operations.
Net Sales (COGS) Gross Profit Operating Expenses Administrative Expenses Selling Expenses Total Operating Expenses Income from operations Other Revenues & Gains (Unusual Gains included) Other Expenses and losses(Unusual included) Income from con
Income from continuing operations
Discontinued Operations Income before extraordinary item Extraordinary item Net Income EPS
Example of Discontinued operations line.
Income from operations of pizza division, less applicable income tax. \\ Loss on disposal of pizza division, less applicable income tax of ____ (Negative #)
When an item of expense is paid and recorded in advance, it is normally called an accrued expense.
True
The revenue recognition principle requires that bad debts be estimated and expensed in the period of the sale.
False
In a proprietorship, the Capital account takes the place of all of the following corporation accounts except:
Dividends
What are the optional steps in the accounting cycle
Reversing Entries, Post-closing trial balance, & Worksheet.
Steps to the accounting cycle
Journalize, Post, Trial Balance, Adjustments, Adjusted Trial ZBalance, Statements, Closing, Post-Closing, & Reversing Entries.
Adjusting Entries can be classified as either
Accruals or Deferrals.
All of the following are points made about accounting information systems and their relationship to the convergence efforts by the IASB and the FASB
commentators argue that the growth in non-U.S. markets is a natural consequence of general globalization of capital flows., commentators argue that SOX is the cause of the relative decline of U.S. IPOs., while there is a need to work toward international
Items that don't impact the income statement
Increase in company reputation & Other comp income.
NI - Preferred Stock Dividends only pertain to
IFCO, IBEI, and NI.
Where does a write-off due to Write-off inventory due to obsolescence go
Other expenses
Write-off of goodwill goes where in incomestatement
Other expenses
Gain on sale of investments goes where on income statement
Other revenue and gains
Statement of Stockholders' Equity Row titles
Beginning Balance, Comp Income, Other Comp Income, Comp Income, Ending Balance.
Statement of Stockholders' Equity Column Titles
Total, CI, RE, Accumulated Other CI, Common Stock.