The Basics
The accounting relationship between assets and the two types of equities (liabilities and owner's equity)
What is the accounting equation
The amount of money owed, or payable, to the creditors of a business
What is accounts payable
System that recognizes and records revenues when cash is received and expenses only when cash is paid out.
Cash Basis of Accounting
Joe was paid $15,000 for a construction job. He broke his leg and could not complete the job. What should he debit and what should he credit for the $15,000 received?
What is debit cash and credit unearned revenue
This section of the work sheet is the source of information for journalizing adjusting entries
What is the Adjustments Section of the Work Sheet
A subdivision under assets, liabilities, or owner's equity that summarizes the changes and shows the balance for a specific items.
What is an account
The amount of money owed to a business by its credit customers
What is Accounts Receivable
A business expense that has been incurred but not paid or recorded.
Revenue received before it is earned
Unearned Revenue
Before journalizing adjusting entries, this is written in the description column of the general journal
Adjusting Entries
A person who handles a broad range of responsibilities, makes business decisions, and prepares and interprets financial reports
What is an accountant
A separate ledger that contains accounts for all creditors.
What is an accounts payable subsidiary ledger
Business revenue that has been earned but not received or recorded
Accrued revenue
Joe received an insurance bill for $1,200.00 on January 1 for six months, February 1 - July 31. Joe paid the bill. What is the debit and what is the credit?
These two accounts are used to adjust merchandise inventory to actual
What is Merchandise Inventory and Income Summary
An entry-level job that can vary from specializing in one part of the accounting system to doing a wide range of tasks
What is an accounting clerk
A separate ledger that contains accounts for all creditors; summarized in the Accounts Payable controlling account in the general ledger
What is the accounts payable subsidiary ledger
Transactions that have not yet been recorded in the accounts because a revenue has been earned but not yet received or an expense has been incurred but not yet paid
What is accruals
An expense paid in advance
Prepaid expense
When posting a journalized adjusting entry to the General Ledger accounts, this is written in the description column
Activities performed in an accounting period that help the business keep its records in an order fashion
What is the accounting cycle
A separate ledger that contains accounts for each charge customer
What is accounts receivable subsidiary ledger
A system that recognizes and records revenues and expenses when they are earned and incurred rather than when cash is collected or cash is paid.
Accrual Basis of Accounting
Deferrals
Journal entries that update the general ledger accounts at the end of the period
Adjusting Entries