WGU VYC1 Principles of Accounting exam

Accounts Payable - Amounts a business must pay in the future. Accounts Receivable - Claims for future collection from customers. Assets - Property owned by a business. Balance Sheet - A formal report of a business' financial condition on a certain date; reports the assets, liabilities, and owner's equity of the business. Break Even - A point at which revenue equals expenses. Business Transactions - A financial event that changes the resources of a firm. Capital - Financial investment in a business; equity. Equity - An owner's financial interest in a business. Expense - An outflow of cash, use of other assets, or incurring of a liability. Fair Market Value - The current worth of an asset or the price the asset would bring if sold on the open market. Fundamental Accounting Equation - The relationship between assets and liabilities plus the owner's equity. Income Statement - A formal report of business operations covering a specific period of time; also called a profit and loss statement or a statement of income and expenses. Liabilities - Debts or obligations of a business. Net Income - The result of an excess of revenue over expenses. Net Loss - The result of an excess of expenses over revenue. On Account - An arrangement to allow payment at a later date; also called a charge account or open-account credit. Owner's Equity - The financial interest of the owner of a business; also called proprietorship or net worth. Revenue - An inflow of money or other assets that results from the sales of goods or services or from the use of money or property; also called income. Statement of Owner's Equity - A formal report of changes that occurred in the owner's financial interest during a reporting period. Withdrawals - Funds taken from the business by the owner for personal use. Accounting - The process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties. Accounting System - A process designed to accumulate, classify, and summarize financial data. Auditing - The review of financial statements to assess their fairness and adherence to generally accepted accounting principles. Auditor's Report - An independent accountant's review of a firm's financial statements. Certified Public Accountant (CPA) - An independent accountant who provides accounting services to the public for a fee. Corporation - A publicly or privately owned business entity that is separate from its owners and has a legal right to own property and do business in its own name; stockholders are not responsible for the debts or taxes of the business. Creditor - One to whom money is owned. Discussion Memorandum - An explanation of a topic under consideration by the Financial Accounting Standards Board. Economic Entity - A business or organization whose major purpose is to produce a profit for its owners. Entity - Anything having its own separate identity, such as an individual, a town, a university, or a business. Exposure Draft - A proposed solution to a problem being considered by the Financial Accounting Standards Board. Financial Statements - Periodic Reports of a firm's financial position or operating results. Generally Accepted Accounting Principles (GAAP) - Accounting standards developed and applied by professional accountants. Governmental Accounting - Accounting work performed for a federal, state, or local governmental unit. International Accounting - The study of accounting principles used by different countries. Management Advisory Services - Services designed to help clients improve their information systems or their business performance. Managerial Accounting - Accounting work carried on by an accountant employed by a single business in industry. Partnership - A business entity owned by two or more people who are legally responsible for the debts and taxes of the business. Public Accountants - Members of firms that perform accounting services for other companies. Separate Entity Assumption - The concept of keeping a firm's financial records separate from the owner's personal financial records. Social Entity - A nonprofit organization, such as a city, public school, or public hospital. Sole Proprietorship - A business entity owned by one person who is legally responsible for the debts and taxes of the business. Statements of Financial Accounting Standards - Accounting principles established by the Financial Accounting Standards Board. Stock - Certificates that represent ownership of a corporation. Stockholders - The owners of a corporation; also called shareholders. Tax Accounting - A service that involves tax compliance and tax planning. Account Balance - The difference between the amounts recorded on the two sides of an account. Accounts - Written records of the assets, liabilities, and owner's equity of a business. Chart of Accounts - A list of the accounts used by a business to record its financial transactions. Classification - A means of identifying each account as an asset, liability, or owner's equity. Credit - An entry on the right side of an account. Debit - An entry on the left side of an account. Double-Entry System - An accounting system that involves recording the effects of each transaction as debits and credits. Drawing Account - A special type of owner's equity account set up to record the owner's withdrawal of cash from the business. Footing - A small pencil figure written at the base of an amount column showing the sum if the entries in the column. Normal Balance - The increase side of an account. Permanent Account - An account that is kept open from one accounting period to the next. Slide - An accounting error involving a misplaced decimal point. T Account - A type of account, resembling a T, used to analyze the effects of a business transaction. Temporary Account - An account whose balance is transferred to another account at the end of an accounting period. Transposition - An accounting error involving misplaced digits in a number. Trial Balance - A statement to test the accuracy of total debits and credits after the transactions have been recorded. Accounting Cycle - A series of steps performed during each accounting period to classify, record, and summarize data for a business and to produce needed financial information. Audit Trail - A chain of references that makes it possible to trace information, locate errors, and prevent fraud. Balance Ledger Form - A ledger account form that shows the balance of the account after each entry is posted. Chronological Order - Organized in the order in which the events occur. Compound Entry - A journal entry with more than one debit or credit. Correcting Entry - A journal entry made to correct an erroneous entry. General Journal - A financial record for entering all types of business transactions; a record of original entry. General Ledger - A permanent, classified record of all accounts used in a firm's operation; a record of final entry. Journal - The record of original entry. Journalizing - Recording transactions in a journal. Ledger - The record of final entry. Posting - Transferring data from a journal to a ledger. Account Form Balance Sheet - A balance sheet that lists assets on the left and liabilities and owner's equity on the right (see Report Form Balance Sheet) Adjusting Entries - A journal entries made to update accounts for items that were not recorded during the accounting period. Adjustments - See Adjusting Entries Book Value - That portion of an asset's original cost that has not yet been depreciated. Contra Account - An account with a normal balance that is opposite that of a related account. Contra Asset Account - An asset account with a credit balance, which is contrary to the normal balance of an asset account. Depreciation - Allocation of the cost of a long-term asset to operations during its expected useful life. Prepaid Expenses - Expense items acquired, recorded, and paid for in advance of their use. Report Form Balance Sheet - A balance sheet that lists the asset accounts first, followed by liabilities and owner's equity. Salvage Value - An estimate of the amount that could be received by selling or disposing of an asset at the end of its useful life. Straight-Line Depreciation - Allocation of an asset's cost in equal amounts to each accounting period of the asset's useful life. Worksheet - A form used to gather all data needed at the end of an accounting period to prepare financial statements. Closing Entries - Journal entries that transfer the results of operations (net income or net loss) to owner's equity and reduce the revenue, expense, and drawing account balances to zero. Income Summary Account - A special owner's equity account that is used only in the closing process to summarize the results of operations. Interpret - To understand and explain the meaning and importance of something (such as financial statements). Postclosing Trial Balance - A statement that is prepared to prove the equality of total debits and credits after the closing process is completed. Step 1 - Accounting Cycle: Step to analyze transactions. Analyze source documents to determine their effects on the basic accounting equation. Step 2 - Accounting Cycle: Step to journalize the transactions. Record the effects of the transactions in a journal. Step 3 - Accounting Cycle: Step to post the journal entries. Transfer data from the journal to the general ledger accounts. Step 4 - Accounting Cycle: Step to prepare a worksheet. At the end of each period, prepare a worksheet.