Accounting Vocabulary Online Quiz

The accounting cycle is the collective process of identifying, analyzing, and recording the accounting events of a company throughout a fiscal period.

Closing entries are journal entries made at the end of an accounting period to transfer balances from temporary accounts (like revenue and expenses) to permanent accounts (like retained earnings).

Dividends are the distribution of a portion of a company's earnings to its shareholders, as decided by the board of directors.

Total shares of ownership in a corporation represent capital stock, not retained earnings. Retained earnings are accumulated profits that have NOT been distributed to shareholders. The statement is false.

Plant assets, also known as property, plant, and equipment (PP&E), are long-term assets used in the operation of a business for more than one year.

A schedule of accounts receivable is a report that lists all individual customer accounts and their respective balances, totaling the amount owed to the company.

Perpetual inventory systems update records continuously as transactions occur, while periodic inventory systems update records only at the end of an accounting period.

Gross profit is calculated as revenue minus the cost of goods sold, representing the profit a company makes after deducting the direct costs associated with producing its products. It is not simply revenue before taxes, which relates to pre-tax income or earnings.

Indirect expenses (or overhead) are costs that cannot be directly traced to a specific product or service, such as electricity, rent, or administrative salaries.

A fiscal period is the specific length of time (e.g., a month, quarter, or year) for which a business summarizes and reports its financial information.

A pay period is the recurring length of time for which an employee is paid their salary or wages.

Payroll refers to the total amount of money paid to all employees for a specific pay period.

A salary is the payment to an individual, whereas payroll is the total amount paid to all employees.

A terminal summary is a report generated by a point-of-sale (POS) system that summarizes all cash and credit card transactions for a specific period.

A sales discount is a reduction in the price of goods or services offered to customers, typically to encourage early payment.

A credit memorandum is a document issued by a seller to a buyer to notify them that a credit has been applied to their account, typically due to returns or allowances. Other options like sales or cash discounts are related to payment terms rather than the return of goods.

A cash discount is a reduction in the invoice price offered by a vendor to encourage the buyer to pay within a specific time frame. Purchases discount is the buyer's perspective, but cash discount is the broader term for the deduction itself.

Posting is the accounting process of transferring information from the journal to the ledger. This ensures that the individual account balances are updated based on the transactions recorded in the journal.

A departmental accounting system is a method of organizing accounting records by department, not a definition of a business type. A business that purchases and sells goods is defined as a merchandising business.

File maintenance involves the ongoing process of organizing, updating, and managing the accounts within a ledger, including assigning numbers and keeping records current. It ensures the integrity of the accounting system.

An account is a record that summarizes all transactions related to a specific item, such as cash, accounts receivable, or a specific expense. The ledger is the collection of all these accounts.

Source documents are the original records that provide evidence of a business transaction, such as invoices, receipts, or checks. Accounting records are the result of processing these documents.

Equities represent the financial rights or claims to the assets of a business. This includes both liabilities (creditor claims) and owner's equity (owner claims).

An asset is a resource owned or controlled by a business that has economic value and provides future benefits. Examples include cash, inventory, equipment, buildings, and accounts receivable. Assets are the economic resources the business uses to operate.