Accounting Final Exam Study Guide

Accounting
planning, recording, analyzing, and interpreting financial information
Withdrawals
assets taken out of a business for the owner’s personal use
Account
a record summarizing all the information pertaining to a single item in the accounting equation
Financial Statements
Financial reports that summarize the financial condition and operations of a business
Accounting Equation
An equation showing the relationship among assets, liabilities, and owner’s equity
Captial
The account used to summarize the owner’s equity in a business.
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Accounting System
a planned process for providing financial information that will be useful to management
Asset
anything of value that is owned
Liability
an amount owed by a business
Owner’s Equity
the amount remaining after the value of all liabilities is subtracted from the value of all assets
Revenue
an increase in owner’s equity resulting from the operation of a business
Expense
a decrease in owner’s equity resulting from the operation of a business
Transaction
a business activity that changes assets, liabilities, or owner’s equity
T-account
An accounting device used to analyze transactions
Debit
An amount recorded on the left side
Credit
an amount recorded on the right side
Normal Balance
The side of the account that is increased
Double-Entry Accounting
The recording of debit and credit parts of a transaction
Journal
A form for recording transactions in chronological order
Source Document
A business paper from which information is obtained for a journal entry
Invoice
A form describing the goods or services sold, the quantity, and the price
Ledger
a group of accounts
Posting
transferring information from a journal entry to a ledger account
Endorsement
A signature or stamp on the back of a check transferring ownership
Petty Cash
an amount of cash kept on hand and used for making small payments.
Electronic Funds Transfer
a computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents
Postdated Check
a check with a future date on it
Code of Conduct
a statement that guides the ethical behavior of a company and its employees
Adjustments
changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period
Balance Sheet
a financial statement that reports assets, liabilities, and owner’s equity on a specific date
Income Statement
a financial statement showing the revenue and expenses for a fiscal period
Net Income
The difference between total revenue and total expenses when total revenue is greater
Net Loss
The difference between total revenue and total expenses when total expenses are greater
Fiscal Period
the length of time for which a business summarizes and reports financial information
Permanent Accounts
accounts used to accumulate information from one fiscal period to the next
Temporary Accounts
accounts used to accumulate information until it is transferred to the owner’s capital account
Closing Entries
Journal entries used to prepare temporary accounts for a new fiscal period
Accounting Cycle
The series of accounting activities included in recording financial information for a fiscal period
Post-closing Trial Balance
A trial balance prepared after the closing entries are posted
Capital Stock
Total shares of ownership in a corporation
Special Journal
a journal used to record only one kind of transaction
Vendor
a business from which merchandise is purchased or supplies or other assets are bought
Terms of Sale
an agreement between a buyer and a seller about payment for merchandise
Contra Account
an account that reduces a related account on a financial statement
Customer
a person or business to whom merchandise or services are sold
Sales Discount
A cash discount on sales taken by a customer
Cash Sale
A sale in which cash is received for the total amount of the sale at the time of the transaction
Credit Card Sale
A sale in which a credit card is used for the total amount of the sale at the time of the transaction.
Subsidiary Ledger
a ledger that is summarized in a single general ledger account
Accounts Payable Ledger
A subsidiary ledger containing only accounts for vendors from whom items are purchased or bought on account.
Accounts Receivable Ledger
A subsidiary ledger containing only accounts for charge customers
Controlling Account
an account in a general ledger that summarizes all accounts in a subsidiary ledger
Salary
the money paid for employee services
Pay Period
The period covered by a salary payment
Payroll
The total amount earned by all employees for a pay period
Total Earnings
the total pay due for a pay period before deductions
Payroll Taxes
Taxes based on the payroll of a business
Withholding Allowance
a deduction from total earnings for each person legally supported by a taxpayer, including the employee.
Net Pay
the total earnings paid to an employee after payroll taxes and other deductions
Social Security Tax
a federal tax paid for old-age, survivors, and disability insurance
Medicare Tax
a federal tax paid for hospital insurance
Federal Unemployment Tax
A federal tax used for state and federal administrative expenses of the unemployment program
State Unemployment Tax
A state tax used to pay benefits to unemployed workers
Retained Earnings
an amount earned by a corporation and not yet distributed to stockholders
Dividends
Earnings distributed to stockholders
Uncollectible Accounts
accounts receivable that cannot be collected
Current Assets
cash and other assets expected to be exchanged for cash or consumed within a year
Plant Assets
Assets that will be used for a number of years in the operation of a business
Depreciation Expense
the portion of a plant asset’s cost that is transferred to an expense account in each fiscal period during a plant asset’s useful life
Accumulated Depreciation
the total amount of depreciation expense that has been recorded since the purchase of a plant asset
Net Sales
Total sales less sales discount and sales returns and allowances
Cost of Merchandise Sold
the original price of all merchandise sold during a fiscal period
Gross Profit on Sales
the revenue remaining after cost of merchandise sold has been deducted
Current Liabilities
liabilities due within a short time, usually within a year
Long-Term Liabilities
liabilities owed for more than a year
Sold Services On Account
Debit: accounts receivable
Credit: sales
Bought Supplies On Account
Debit: supplies
Credit cash
Replenish Petty Cash Fund
Debit: Any Expense or Asset
Credit: Cash
Record Cash and Credit Card Sales
Debit: cash
Credit: sale and sales tax payable
Received Cash On Account
Debit: cash
Credit: accounts receivable
Record Employer Payroll Taxes Expense
Debit: Payroll Tax Expense
Credit: Medicare Tax Payable
Credit: Social Security Tax Payable
Credit: Unemployment Tax Payable-State
Credit: Unemployment Tax Payable-Federal
Pay Federal Unemployment Taxes
Debit: Unemployment Tax Payable- Federal
Credit: Cash
Record Office Supplies Adjustment (Balance is $2,100 and Inventory is $900)
Debit: Supplies Expense-Office
Credit: Supplies- Office
Record Federal Income Tax Expense Adjustments
Debit: Federal Income Tax Expense
Credit: Federal Income Tax Payable
Pay a Payroll (deductions for employee income tax, Social Security and Medicare Tax, and U.S. Saving Bonds)
Debit: Salary Expense
Credit: Employee Income Tax Payable
Credit: Social Security Tax Payable
Credit: Medicare Tax Payable
Credit: U.S. Saving Bonds
Credit: Federal Income Tax Payable