The Accounting Cycle
The process of recording business transactions in a journal
What is journalizing
Reports prepared to summarize the changes resulting from business transactions that occur during an accounting period
What are financial statements
The amount a customer can deduct from the total owed for purchased merchandise if payment is made within a certain time
What is a cash discount
A person who handles a broad range of responsibilities, makes business decisions, and prepares and interprets financial reports
Who is an accountant
The accounting relationship between assets and the two types of equities. Assets = liabilities + owner’s equity
What is the accounting equation
The process of transferring information from the journal to individual general ledger accounts
What is posting
The general ledger account used to summarize the revenue and expenses for the period
What is the income summary account
A special journal used to record all transactions in which cash is paid out or decreased
What is a cash payments journal
A licensed professional who has met certain education and experience requirements and passed a national test
Who is a Certified Public Accountant (CPA)
An economic event that causes a change—either an increase or a decrease—in assets, liabilities, or owner’s equity
What is a business transaction
Accounts used to collect information that will be transferred to a permanent capital account at the end of a single accounting period
What are temporary accounts
A report of the net income or net loss for a specific period
What is the income statement
An account that serves as a control on the accuracy of the account balances in the subsidiary ledger; its balance must equal the total of all account balances in the subsidiary ledger
An entry-level job that can vary from specializing in one part of the system to doing a wide range of tasks
Who is an accounting clerk
The cost of goods or services used to operate a business
What is an expense
A working paper used to collect information from the ledger accounts for use in completing end-of-period activities
What is a worksheet
A report of the balances in the permanent accounts on a specific date
What is the balance sheet
The form a business uses to notify its suppliers (creditors) of a return or to request an allowance
What is a debit memorandum
A person who transforms ideas for products or services into real-world businesses
Who is an entrepreneur
Income earned from the sale of goods and services
What is revenue
A list of the permanent general ledger account balances; it is prepared to prove the ledger after the closing entries are posted
What is the post-closing trial balance
A financial statement that summarizes changes in the owner’s capital account as a result of business transactions during the period
What is the statement of changes in owner's equity
A price reduction granted for damaged goods kept by the customer
What is a sales allowance
A business owned by one person
What is a sole proprietorship
The removal of cash or another asset from the business by the owner for personal use
What is a withdrawal