Accounting 101
An equation showing the relationship among assets, liabilities, and owner’s equity.
What is the accounting equation?
The procedure for transferring information from a journal entry to a ledger account is
What is posting?
A business form giving written acknowledgement for cash received.
What is a receipt?
The difference between total revenue and total expenses when total revenue is greater.
What is net income?
A financial statement that reports the changes in the capital account for a proprietorship for a period of time.
What is statement of owners equity?
A signature or stamp on the back of a check, transferring ownership.
What is an endorsement?
Anything of value that is owned.
What is an asset?
A form for recording transactions in chronological order.
What is a journal?
Cash paid for an expense in one fiscal period that is not used until a later period.
What is a prepaid expense?
Assuring that financial statements contain all information necessary to understand a business’s financial condition is an application of the accounting concept
What is adequate disclosure?
Reporting income when the cash is received and expenses when the cash is paid.
What is cash basis of accounting?
Determining that the amount of cash agrees with the accounting records is
What is proving cash?
A form describing the goods or services sold, the quantity, the price, and the terms of sale.
What is an invoice?
Reporting income when it is earned and expenses when they are incurred.
What is accrual basis of accounting?
A financial statement showing the revenue and expenses for a fiscal period.
What is an income statement?
The difference between total revenue and total expenses when total revenue is greater.
What is net income?
If an error requires a correcting entry, the source document describing the correction to be made
What is a memorandum?
A business paper from which information is obtained for a journal entry.
What is a source document?
Journal entries recorded to update general ledger accounts at the end of a fiscal period.
What is adjusting entries?
A financial statement that reports the value of a business’s assets, liabilities, and owner’s equity on a specific date.
What is a balance sheet?
The standards and rules that accountants follow while recording and reporting financial activities.
GAAP
Financial reports that summarize the financial conditions and operations of business.
What are financial statements?
A columnar accounting form used to summarize the general ledger information needed to prepare financial statements.
What is a work sheet?
A proof of the equality of debits and credits in a general ledger.
What is a trial balance?
A formal report that shows what an individual owns, what an individual owes, and the difference between the two.
What is a net worth statement?