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1)(Accounting)

Accounting is an information system that identifies, records, and communicates the economic
events of an organization to interested users.
a. The first part of the process, identifying, involves identifying those events that are
considered evidence of economic activity relevant to a particular business organization.
b. Recording is the keeping of a chronological diary of events, measured in dollars and cents.
c. Communication occurs through the preparation and distribution of accounting reports.
2)(Assets)

Assets are resources a business owns. The business uses its assets in carrying out such
activities as production and sales. It usually contains current assets and long-term assets.
3)(Balance sheet, Statement of Financial Position)

A statement of financial position reports the assets, liabilities, and equity of a company at a
specific date to help investors realize the management of the enterprise.
4)(Basic accounting equation)
=+
The basic accounting equation is:

Assets = Liabilities + Equity.

5)(Bookkeeping)

Bookkeeping usually involves the recording of economic events and is therefore just one part
of the accounting process.

6)(Corporation)

A corporation is a business organized as a separate legal entity under corporation law with
ownership divided into transferable shares.
7)(Cost principle)

Cost principle dictates that companies should record assets at their cost. This is also true over
the time the asset is held.
8)(Economic entity assumption)

Economic entity assumption requires that the activities of the entity be kept separate and
distinct from the activities of its owner and all other economic entities.
9)(Ethics)

Ethics are the standards of conduct by which ones actions are judged as right or wrong, honest
or dishonest, fair or not fair. Effective financial reporting depends on sound ethical behavior.
10)(Expenses)

Expenses are the cost of assets consumed or services used in the process of earning revenue.
11)(Financial Accounting Standards Board, FASB)

FASB is a primary accounting standard-setting body that most companies follow.

12)(Generally accepted accounting principles, GAAP)

GAAP is an accounting principle which most of the global companies referred to.
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13)(Income statement)

An income statement presents the revenues and expenses and resulting net income (or net loss)
of a company for a specific period of time.
14)(Liabilities)

Liabilities are claims against assets. They are existing debts and obligations.
15)(Management accounting)

Management accounting provides the accounting information in order to better inform

managers before they decide matters within their organizations, which aids their management
and performance of control functions.
16)(Monetary unit assumption)

Monetary unit assumption requires that companies include in the accounting records only
transaction data that can be expressed in money terms. This assumption enables accounting to
quantify (measure) economic events.
17)(Net income)

Net Income (The value is positive)=Revenue-Expense

18)(Net loss)

Net loss occurs when the value=Revenue-Expense is negative

19)(Equity)

Equity is the ownership claim on total assets. Equity generally consists of share
capitalordinary and retained earnings.
20)(Changes of equity statement)

A changes of equity statement summarizes the changes in equity for a specific period of time.
21)(Partnership)

A partnership is a business owned by two or more persons associated as partners.

22)(Proprietorship)

A proprietorship is a business owned by one person.

23)(Revenue)

Revenues are the gross increase in equity resulting from business activities entered into for the
purpose of earning income.
24)(Statement of cash flows)
()()
A statement of cash flows summarizes information concerning the cash inflows (receipts) and
outflows (payments) for a specific period of time.
25)(Transactions)

Transactions (business transactions) are a businesss economic events recorded by accountants.


1)(Accrual-basis accounting)

The revenue recognition and expense recognition principles are used under accrual-basis
accounting. The revenue recognition principle requires that companies recognize revenue in the
accounting period in which the performance obligation is satisfied. The expense recognition
principle requires that efforts (expenses) be matched with results (revenues).
2)(Accrued expenses)

Accrued expenses are expenses incurred but not yet paid in cash or recorded. Accrued expenses
result from the same causes as accrued revenues and include interest, rent, taxes, and salaries.
3)(Accrued revenues)

Accrued revenues are revenues for services performed but not yet received in cash or recorded.
Accrued revenues may accumulate with the passing of time as in the case of interest and rent, or
through services performed but for which payment has not been collected.
4)(Adjusted trial balance)

After all adjusting entries have been journalized and posted, an adjusted trial balance is prepared.
This trial balance shows the balances of all accounts, including those that have been adjusted, at
the end of the accounting period. Therefore, the purpose of an adjusted trial balance is to prove the
equality of the total debit balances and the total credit balances in the ledger after all adjustments
have been made.
5)(Adjusted entries)

Adjusting entries are made in order for companies to record revenues in the period in which
services are performed, and for expenses to be recognized in the period in which they are incurred.
Adjusting entries are required every time financial statements are prepared.
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6)(Book value)

Book value is known as a list of the accounts and their balances after all adjustments have been
made.
7)(Calendar year)
1 1 12 31
The calendar year defines the period which ranges from Jan.1 to Dec.31 as an accounting period.
8)(Cash-basis accounting)

Under cash-basis accounting, revenue is recorded only when cash is received and expenses are
recorded only when paid.
9)(Contra asset account)

A contra asset account is an asset account where the balance will be either a credit balance or a
zero balance. Since a credit balance in an asset account is contrary to the normal or expected debit
balance the account is referred to as a contra asset account.
10)(Depreciation)

Depreciation is the process of allocating the cost of an asset to expense over its useful life in a
rational and systematic manner.
11)(Fiscal year)

The accounting time period of one year in length is usually known as a fiscal year. Accounting
time periods are generally a month, a quarter, or a year.

12)(Matching principle)

Based on accrual-basis accounting, matching principle states that the revenue recognition should
match up with the expense recognition.
13)(Prepaid expenses)

Prepaid expenses are expenses paid in cash and recorded as assets before they are used or
consumed.
14)(Revenue recognition principle)

The revenue recognition principle requires that companies recognize revenue in the accounting
period in which the performance obligation is satisfied.
15)(Time period assumption)

The time period assumption assumes that the economic life of a business can be divided into
artificial time periods
16)(Unearned revenues)

Unearned revenues are revenues received and recorded as liabilities before they are earned.
17)(Useful life)

Useful life is the estimated lifespan of a depreciable fixed asset, during which it can be expected to
contribute to company operations.


1)(Closing entries)

Closing entries formally recognize in the ledger the transfer of net income (or loss) and dividends
to retained earnings as shown in the retained earnings statement.
2)(Correcting entries)

Correcting entries are prepared for errors that occur in recording transactions should be corrected
as soon as they are discovered.
3)(Current assets)
()

Current assets are assets that a company expects to convert to cash or use up within one year.
Current assets are listed in the priority order in which they are expected to be converted into cash.
4)(Current liabilities)
()

Current liabilities are obligations that the company is to pay within the coming year.
5)(Income summary)

Income summary is a temporary account, used in closing revenue and expense accounts to
calculate the amount of detail in the Retained Earnings account.
6)(Intangible assets)

Intangible assets are assets that do not have physical substance yet often are very valuable.

7)(Liquidity)

Liquidity is the ability of an entity to pay its liabilities in a timely manner (usually a year), as they
come due for payment under their original payment terms.
8)(Long-term investments)

Long-term investments are generally investments in stocks and bonds of other companies that are
normally held for many years.
9)()(Permanent (real) accounts)

Permanent accounts are those accounts that continue to maintain ongoing balances over time. All
accounts that are aggregated into the balance sheet are considered permanent accounts; including
the asset, liability, and equity accounts.
10)(Post-closing trial balance)

After all closing entries have been journalized and posted, a post-closing trial balance is prepared.
The purpose of this trial balance is to prove the equality of the permanent account balances that
are carried forward into the next accounting period.
11)()(Temporary (nominal) accounts)

A temporary account is an account in which transactions are accumulated for one accounting
period, after which the account is zeroed out.