Accounting flashcards, generated for you.

Income Statement (profit/loss), Balance Sheet (assets/liabilities/equity), and Cash Flow Statement (cash in/out activities).

Debit = left side entry (increases assets/expenses, decreases liabilities/equity). Credit = right side entry (increases liabilities/equity/revenue, decreases assets/expenses). Every transaction has equal debits and credits.

Assets = Liabilities + Equity. Example: A company with $100k cash (asset), $30k loan (liability), and $70k owner equity satisfies: $100k = $30k + $70k.

Accrual: revenue/expenses recorded when earned/incurred, regardless of cash flow. Example: Invoice a client in December, record revenue then even if paid in January. Cash: record only when money moves. Accrual matches revenue to effort.

Transferring journal entries to the general ledger accounts. Example: You record a $500 sale as a journal entry, then 'post' that $500 to both the Sales revenue account and Accounts Receivable account in the ledger.

A list of all ledger accounts and their balances at a point in time. Purpose: verify that total debits equal total credits (confirming no posting errors). It's not a financial statement but a checking tool.

Entries made at period-end to match revenue/expenses to the correct period under accrual accounting. Example: Accrue $5k in wages earned by employees in December but paid in January—debit Wage Expense, credit Wages Payable.

Transferring all temporary accounts (revenue, expenses, dividends) to Retained Earnings to reset them to zero for the next period. Permanent accounts (assets, liabilities, equity) stay open. This isolates each period's net income.

Gross Profit = Revenue − Cost of Goods Sold (measures production efficiency). Net Income = Revenue − All Expenses including COGS, operating, tax, interest (bottom-line profit). Example: $1M revenue, $400k COGS = $600k gross profit; after $300k operating expenses = $300k net income.

A principle that items are significant if their omission or misstatement would influence economic decisions of users. Example: A $50 office supply error is immaterial for a $100M company but material for a small business; thus treatment may differ based on context.