Misc
Any 12-month accounting period adopted by a business.
Fiscal Year
Purchased various shop supplies (such as grease, solvents, nuts, and bolts) from CAPA Auto Parts; the cost was $1,400, due in 30 days. These supplies are expected to meet Overnight’s needs for three or four months.
DR Supplies $1,400
CR Accounts Payable $1,400
A financial statement summarizing the results of operations of a business by matching its revenue and related expenses for a particular accounting period. Shows the net income or net loss.
Income Statement
The costs of the goods and services used up in the process of obtaining revenue.
Expenses
The generally accepted accounting principle that determines when expenses should be recorded in the accounting records. The revenue earned during an accounting period is offset with the expenses incurred in generating that revenue.
The matching principle
What does an accountant say when boarding a train?
‘Mind the GAAP’.
The condition of being held responsible for one’s actions by the existence of an independent record of those actions.
Accountability
Overnight Auto Services declares and pays a dividend of 40 cents per share to the owners of its 8,000 shares of capital stock
DR Dividends 3,200
CR Cash 3,200
Cash received in March for April Ads $2,000
Cash received in April for April Ads $3,000
Cash received in April for May Ads $2,500
How much should XYZ Advertising agency should report on April's Income Statement?
5,000
A chronological record of transactions, showing for each transaction the debits and credits to be entered in specific ledger accounts.
Journal
The generally accepted accounting principle that determines when revenue should be recorded in the accounting records. Revenue is realized when services are rendered to customers or when goods sold are delivered to customers.
The realization principle.
Why did the IRS audit the chiropractor?
He owed back taxes.
A two-column schedule listing the names and the debit or credit balances of all accounts in the ledger.
Trial balance
Collected $4,980 cash for repairs made to vehicles of Airport Shuttle Service.
DR Cash 4,980
CR Repair Service Revenue (or fees earned) 4,980
Wage payments in Feb for work performed by employees in Jan $15,000
Wage payments in Feb for work performed by employees in Feb $25,000
Wage payments in March for work performed by employees in Feb 5,000
30,000
The process of transferring information from the journal to individual accounts in the ledger.
Posting
The accounting principle of providing with financial statements any financial and other facts that are necessary for proper interpretation of those statements.
Disclosure
Number 32 on the NE Patriots
He recently started his 200th game.
Devin McCourty
Calls for recording revenue in the period in which it is earned and recording expenses in the period in which they are incurred. The effect of events on the business is recognized as services are rendered or consumed rather than when cash is received or paid.
Accrual Basis of Accounting
Paid Daily Tribune $360 cash for newspaper advertising to be run during February.
DR Ad Expense 360
CR Cash 360
Which statement does not describe Net income
A. Is equal to revenue minus expenses.
B. Is equal to revenue minus the sum of expenses and dividends.
C. Increases owners’ equity.
D. Is reported by a company for a specific period of time.
B. Is equal to revenue minus the sum of expenses and dividends.
That portion of stockholders’ (owners’) equity resulting from profits earned and kept in the business.
Retained Earnings
The traditional accounting practice of resolving uncertainty by choosing the solution that leads to the lower amount of income being recognized in the current accounting period. This concept is designed to avoid overstatement of financial strength or earnings.
Convervatism
A successful tennis player has a lot of...
Net Income
List the 8 steps in the accounting cycle in order.
(1) journalizing (recording) transactions, (2) posting each journal entry to the appropriate ledger accounts, (3) preparing a trial balance, (4) making end-of-period adjustments, (5) preparing an adjusted trial balance, (6) preparing financial statements, (7) journalizing and posting closing entries, and (8) preparing an after-closing trial balance.
The business purchased a delivery truck $45,000; they put down 5,000 and issued a note for the remainder due in 3 years.
DR Delivery Truck 45,000
CR Cash 5,000
CR Notes Payable 40,000
What are the rules of debit and credit for expense accounts and revenue accounts? Make a T account to illustrate the rules.
REVENUE
DR | CR
_ | +
EXPENSE
DR | CR
+ | _
A system of recording every business transaction with equal dollar amounts of both debit and credit entries. As a result of this system, the accounting equation always remains in balance; in addition, the system makes possible the measurement of net income and also the use of error-detecting devices such as a trial balance.
Double-entry accounting
An assumption by accountants that the monetary unit used in the preparation of financial statements changes at a sufficiently slow rate that the resulting impact on financial statements does not distort the information.
Stable-dollar assumption
What happened to the CPA who became a chef?
It wasn’t long before he was cooking the books!