Century 21 Accounting Chapter 6

T account – an accounting device used to analyze transactions
Proving Cash – determining that the amount of cash agrees with the balance of the cash account in the accounting records
statement of owners equity – a summary of the changes in owners equity that have occurred during a specific period of time, such as a month or a year
gains/ losses of selling depreciable assets – recorded on income statement
*gain- revenues
contractual situations – explanations of certain restrictions or covenants attached to specific assets or, more likely, to liabilities
Step 3 of handling a transaction – Prepare and analyze the trial balance
temporary accounts – revenue, expense, and dividend accounts whose balances a company transfers to retained earnings at the end of accounting period
When actual input data from past periods is used to develop a budget:
a. past inefficiencies are excluded
b. expected future changes are incorporated
c. information is available at a low cost
d. audited financial information must be used – c. information is available at a low cost
Order the following objects in increasing size (radius):
Sales on account – A sale for which cash will be received at a later date
Managerial accounting – designed to meet the needs of internal users.
Order the fоllоwing оbjects in increаsing size (rаdius):
money spent is called a…. – "cost" or an "expenditure"
audit – public accounting firms provide the service of reviewing financial reports and providing an opinion whether or not the financial statements are presented in conformity with generally accepted accounting principles

investors and creditors often require financial statements to be audited in order to have a higher level of confidence in the reliability of the information provided on the financial statements

Overdraft. – The issuance of a check without sufficient funds in the account when it is presented for payment.
Another term for Profit and Lose Statement is – Income Statement

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