Double-entry Bookkeeping System and Balance Sheet Essay

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Pages: 5
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Individual homework
Week.2
4-1
Accounting equivalence:
It insists that business transaction be recorded in double-entry fashion and the total debits must equal or balance total credits. Total assets= total liability+ owners’ equity.
Accrual:
It is an accounting concept which says company’s expenses and revenues are taken into account once they occur and not at the time the cash is paid out or received.
Activity based costing:
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity's cost has been determined, the cost of the activities is then allocated to the product, service, customer, etc. that required the activity. This technique is more logical for allocating overhead than simply allocating costs based on machine hours or direct labor hours.
Balance sheet:
A financial statement that summarizes a company's assets, liabilities and shareholders' equities at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. The balance sheet must follow the following formula: Assets = Liabilities + Shareholders' Equity
Basis:
There are 2 definition come to mind:
1- Basis of accounting which is a method used to determine when revenues and expenses (with associated assets and liabilities) are recognized in the accounts of a firm, and reported in its financial statements. In accrual basis accounting, for example, revenues are recognized when earned and expenses are recognized when incurred, whether or not any cash is received or paid. In cash basis accounting, however, revenues and expenses are recognized only when cash is received or paid, irrespective of the timing of actual sales or purchases.
2- The variation between the spot price of a deliverable commodity and the relative price of the futures contract for the same actual that has the shortest duration until maturity.
Budgeting:
Process of expressing quantified resource requirements (amount of capital, amount of material, number of people) into time-phased goals and milestones.
Consistency:
It is an accounting principle that states that once an accounting method is adopted, it should be followed consistently from one accounting period to the next.
Contra account:

An account which offsets another account. A contra-asset account has a credit balance and offsets the debit balance of the corresponding asset. A contra-liability account has a debit balance and offsets the credit balance of the corresponding liability.
Credit:

An accounting entry that either decreases assets or increases liabilities and equity on the company's balance sheet. On the company's income statement, a debit will reduce net income, while a credit will increase net income.
Current liabilities:
They are any debts that must be paid within one year or one operating cycle, whichever is longer. Current liabilities are a subcategory of liabilities, which appear on a company's balance sheet.
Debit:
It is an accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet or in your bank account. A debit on an accounting entry will have opposite effects on the balance depending on whether it is done to assets or liabilities, with a debit to assets indicating an increase and vice versa for liabilities.
Depreciation:
It is the assigning or allocating of a plant asset's cost to expense over the accounting periods that the asset is likely to be used.
Double-entry bookkeeping:
It is an accounting technique which records each transaction as both a credit and a debit. Credit entries represent the sources of financing, and the debit entries represent the uses of that financing. Since each credit has one or more corresponding debits (and vice versa), the
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