Chapter 6
The difference between total revenue and total expenses when total expense is greater.
Net loss
The difference between total revenue and total expenses when total revenue is greater.
Net Income
A financial statement showing the revenue and expenses for a fiscal period.
Income statement
A comparison between two components of financial information
Financial ratio
Accounts used to accumulate information from one fiscal period to the next
Permanent accounts
A fiscal period consisting of 12 consecutive months.
Fiscal year
A financial statement that reports assets, liabilities, and owner’s equity on a specific date.
Balance sheet
The ratio of net income to total sales
Return on Sales
Changes recorded on a work sheet to update general ledger accounts at the end of a fiscal period
Adjustments
Accounts used to accumulate information until it is transferred to the owner’s capital account
Temporary accounts
Journal entries recorded to update general ledger accounts at the end of a fiscal period.
Adjusting entries
A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.
Work Sheet
Cash paid for an expense in one fiscal period that is not used until a later period.
Prepaid expense
The area of accounting which focuses on reporting information to external users
Financial Accounting
Journal entries used to prepare temporary accounts for a new fiscal period
Closing entries
Cash paid for an expense in one fiscal period that is not used until a later period.
Prepaid expense
Reporting income when the cash is received and expenses when the cash is paid.
Cash basis of accounting
The calculation and interpretation of a financial ratio
Ratio Analysis
The area of accounting that focuses on reporting information to internal users
Managerial accounting
A trial balance prepared after the closing entries are posted
Post-closing trial balance
The length of time for which a business summarizes its financial information and reports its financial performance.
Fiscal period
Reporting income when earned and expenses when incurred.
Accrual basis of accounting
Reporting an amount on a financial statement as a percentage of another item on the same financial statement
Vertical analysis
A financial statement that reports the changes in the capital account for a proprietorship for a period of time
Statement of Owner’s Equity
The series of accounting activities included in recording financial information for a fiscal period.
Accounting cycle