Accounting Vocabulary Flashcard

Front

What is a General Ledger?

Back

A record of all financial transactions

Answer explanation

A General Ledger is a comprehensive record of all financial transactions within an organization, making 'A record of all financial transactions' the correct choice. It serves as the foundation for financial reporting.

Front

What is the method of depreciation where an equal amount is allocated each year?

Back

Straight-Line Depreciation

Answer explanation

The method of depreciation that allocates an equal amount each year is called Straight-Line Depreciation. This approach evenly spreads the cost of an asset over its useful life, making it straightforward and easy to calculate.

Front

What are the costs that remain constant regardless of production levels?

Back

Fixed Costs

Answer explanation

Fixed costs are expenses that do not change with production levels, such as rent and salaries. In contrast, variable costs fluctuate with production volume, making fixed costs the correct answer.

Front

What is the financial statement that shows a company's assets, liabilities, and equity?

Back

Balance Sheet

Answer explanation

The Balance Sheet is the financial statement that provides a snapshot of a company's assets, liabilities, and equity at a specific point in time, making it the correct choice for this question.

Front

Which accounting principle requires expenses to be recorded in the same period as the revenues they help to generate?

Back

Matching Principle

Answer explanation

The Matching Principle requires that expenses be recorded in the same period as the revenues they help generate, ensuring accurate financial reporting and reflecting the true profitability of a business.

Front

What is the term for the reduction in value of an asset over time due to wear and tear?

Back

Depreciation

Answer explanation

The term for the reduction in value of an asset over time due to wear and tear is 'Depreciation'. This reflects the loss of value as the asset ages, unlike appreciation, which indicates an increase in value.

Front

What is the accounting term for the allocation of the cost of an intangible asset over its useful life?

Back

Amortization

Answer explanation

The correct term for allocating the cost of an intangible asset over its useful life is 'Amortization'. This process systematically reduces the asset's value on the balance sheet, similar to depreciation for tangible assets.

Front

Which financial statement provides a summary of a company's revenues and expenses over a specific period?

Back

Income Statement

Answer explanation

The Income Statement summarizes a company's revenues and expenses over a specific period, showing profitability. In contrast, the Balance Sheet reflects assets and liabilities, while the Cash Flow Statement tracks cash movements.

Front

What is the term for the accounting method where revenue is recorded when earned and expenses are recorded when incurred?

Back

Accrual Basis

Answer explanation

The Accrual Basis accounting method recognizes revenue when it is earned and expenses when they are incurred, regardless of cash flow. This contrasts with Cash Basis, which records transactions only when cash is exchanged.

Front

What is the accounting term for the systematic reduction of a liability over time?

Back

Amortization