Accounting 101 Chapter 4

a spreadsheet prepared by many accountants as part of the normal end-of-period process, it shows adjustments effect on financial statements

cash and other assets that are expected to be converted to cash or sold or used up usually within one year or less, through the normal operations of business.

can include notes receivable, acc receivable, supplies and other prepaid expenses

a customers written promise to pay an amount and possibly interest at an agreed-upon rate.

amounts customers owe, less formal than notes receivable, usually result from providing services or merch on account

long-term, or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time

amount business owes to creditors; the rights of creditors that represent debts of the business

liabilities that will be due within a short time, usually one year or less, and that are to be paid out of current assets, ex wages payable, notes payable

liabilities that will not be due for a long time, usually more than a year, would be reported below current liabilities, become current liabilities in period they are paid, if renewed remain the same. ex mortgage payable

relatively permanent accounts, the balance are carried over from year to year from the balance sheet. examples are cash, equipment, acc rec,; term for balance sheet accounts because they are relatively permanent and carried forward from year to year

accounts that only report one period, are not carried over from year to year.ex wages payable

the entries transferring temporary account balances to permanent account balances; the entries that transfer the balances of the revenue, expense, and drawing accounts to the owners capital account

the process of completing closing entries; the transfer process of converting temporary account balances to zero by transferring the revenue and expense account balances to income summary, tansferring the income summary account balance to the owners capital account, and transferring the owners drawing account to the owners capital account

transfer revenue account balances to income summary account (debit rev, credit IS)

transfer expense account balances to income summary account (credit expense, debit IS)

income summary balance, either net income or loss, is transferred to the owners capital account (debit IS, credit owners cap account)

the balance of the owners drawing account is transferred to the owners capital account (debit owners cap account, credit drawing account)

temporary account that is only used during the closing process; an account to which the revenue and expense account balances are transferred at the end of the period

an account that has the effect of clearing the revenue and expense accounts of their balances (another name for income summary)

prepared after the closing entries have been posted, verify that the ledger is in balance at the beginning of the next period

the accounting process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance

the annual accounting period adopted by business

fiscal year that ends when business activities have reached the lowest point in its annual operating cycle

the ability to convert assets into cash

the ability of a business to pay its debts

the excess of the current assets of a business over its current liabilities

current assets-current liabilities

means of expressing the relationship between current assets and current liabilities; a financial ratio that is computed by dividing the current assets by current liabilities

current assets/current liabilities

name for cross referencing process referred to in step 3 of EOP

enter the title

enter the unadjusted trial balance

enter the adjustmens

enter the adjusted trial balance

extend the accounts to the income statement and balance sheet columns

total the income statement and balance sheet columns, compute the net income or net loss, and complete the spreadsheet