Chapters 1-2
What is the accounting equation
Assets = Liabilities + Owner's Equity
This style of accounting involves recording debit and credit parts of a transaction
Double-entry Accounting
What is a permanent account?
An account that accumulates information from one fiscal period to the next
What is a corporation?
An organization with the legal rights of a person which many persons or other corporations may own - LARGE companies
A journal with two amount columns in which all kinds of entries can be recorded is called a [ ] journal
General
This refers to a business that is owned by one person
Proprietorship
What is the ledger that contains all accounts needed to prepare financial statements?
General Ledger
What is a fiscal period?
The length of time for which a business summarizes its financial information and reports its financial performance
The amount a business adds to the cost of merchandise to establish the selling price is called a
Markup
This is a method of paying an employee based on the amount of sales the employee generates
Commission
An accounting device used to analyze transactions is called a [ ] account
T
What is a canceled check?
A check that has been paid to the bank
What is the difference between the cash and accrual basis of accounting?
Bonus: Which basis does GAAP require?
Accrual - reporting income when it is earned and expenses when they are incurred
Cash - reporting income when the cash is received and expenses when the cash is paid
Bonus: Accrual Basis of Accounting
A ledger that is summarized in a single general ledger account is called a [ ] ledger
Subsidiary
Any amount withheld from an employee's gross earnings is called a
*Bonus: identify 3 types of income tax
Payroll Deduction
Bonus: FICA tax, social security tax, medicare tax
What does GAAP stand for and why does it exist?
Generally Accepted Accounting Principles - ensures all accounting companies follow the same guidelines when reporting financial data
What is a memorandum and when is it used?
A form on which a message is written to describe a transaction. They are used when there is no other source document for the transaction
What is the difference between financial and managerial accounting?
Financial - focuses on reporting information to external users
Managerial - focuses on reporting information to internal users
What is a batch report?
A report of credit card sales produced by a point-of-sale terminal
Who pays federal and state unemployment tax?
Employers
Define the term Normal Balance
The side of the account that is increased
What is an endorsement? Name the different kinds of an endorsement
A signature or stamp on the back of a check transferring ownership. Three types: blank, special, and restrictive
What is vertical analysis?
Reporting an amount on a financial statement as a percentage of another item on the same financial statement
What is a contra account?
An account that reduces a related account on a financial statement
What is the difference between an IRA and a Roth IRA?
*Bonus: Why is a Roth IRA this way?
IRA - withdrawals are subject to federal income taxes
Roth IRA - withdrawals are not subject to federal income taxes
Bonus: Taxes are paid on Roth IRA contributions BEFORE they are put into the account