Vocabulary
What are loans, accounts payable, mortgages, bonds, warranties, and expenses defined as?
Liabilities
What are the two different sides of the T-Account
Credits and Dedits
What is the debit side?
The side of the accounting equation where assets are recorded.
What is the term for recording a business transaction in the journal?
Journalizing. It is important to have a chronological record of transactions.
What is the income statement?
This financial statement reports a company's revenues and expenses during a specific period.
Money owed by a business to its suppliers
Accounts Payable
What side is the credit for Assets located on
The Right Side
What is an expense account?
The type of account that is increased with a debit entry.
What is a "debit" when journalizing transactions, and why is it significant?
A debit is an entry that increases assets or expenses and decreases liabilities or income. Example: Cash purchase of supplies – debit Supplies, credit Cash.
What is net income?
The term for the portion of the income statement that represents what remains for the owners after deducting expenses from revenues.
Money due to a firm for goods or services delivered or used but not yet paid for by customers
Accounts Receivable
That is the Accounting Equation
Assets = Liabilities + Owner's Equity
What is the credit side?
When a liability account is decreased, which side of the account is credited.
Explain double-entry accounting in journalizing transactions.
Double-entry accounting means each transaction has equal debit and credit entries. It ensures the accounting equation (Assets = Liabilities + Equity) is always balanced.
What is financing activities?
The category of activities in the cash flow statement that includes transactions with creditors and investors.
The proportion of the total value of a company's assets that can be claimed by the owners
Owner's equity
What Accounts are on the Credit side of the T-Chart
Liabilities, Capital, Revenue
What is the normal balance rule?
The rule that states assets are increased with a debit entry and decreased with a credit entry.
What is a compound journal entry, and when is it used?
A compound journal entry involves more than two accounts. It's used when a transaction affects multiple accounts. Example: Sale of goods on credit – debit Accounts Receivable, credit Sales and Inventory.
What is the cost principle?
The accounting principle that states that assets should be recorded at their original cost, not market value.
A reward such as cash that a company gives to its shareholders
Dividends
The side of the account that is positive or increasing is called
Normal Balance
What is a revenue account?
The term for the account that is credited when recording revenue.
When journalizing adjusting entries, what accounts are involved, and what is their purpose?
Adjusting entries involve revenue or expense accounts and are made to ensure accurate financial reporting. Example: Accrued revenue – debit Accounts Receivable, credit Revenue.
What is the profit margin ratio?
This financial ratio measures a company's profitability by expressing net income as a percentage of revenue.