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ACTG 2010 (71)
Chapter 3

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York University
ACTG 2010
Douglas Kong

Chapter 3 Formula Summary ReturnonEquity= Net Income AverageShareholder s Equity Profit MarginRatio= Net Income Sales Key Terms Account: a category of asset, liability, owners’ equity, revenue, or expense Accounting Cycle: the process by which data about economic events are entered into an accounting system, processed, organized, and used to produce info such as financial statements Accounting Estimate: estimated amounts that must be made when preparing financial statements because the actual amounts pertaining to many economic events and transactions are not known with certainty at the time. Examples include the amount of accounts receivable that will not be collected, the useful lives of capital assets, and the cost of warranty services that have not yet been provided Accrued Expense: An expense that is recognized and recorded in the financial statements before the cash payment is made Accrued Liability: A liability that is recognized and recorded in the financial statements before the cash payment is made Accrued Revenue: revenue that is recorded before cash is received Adjusting Entry: journal entries recorded at the end of a recording period that reflect economic changes that may have occurred during the period but that have not been recorded in the accounting system, adjusting entries are not triggered by exchanges with outside entries Carrying Amount: the amount recorded in the accounting records for an asset, liability, or equity item Closing Journal Entry: the journal entry required for resetting temporary account balances to zero and transferring the balances in the temporary accounts to retained earnings or owners’ equity Contra-asset account: An account that is used to accumulate subtractions from a related asset account Credit: An entry to an account that has the effect of decreasing assets and expenses, and increasing liabilities, owners’ equity, and revenues Debit: an entry to an account that has the effect f increasing assets and expenses, and decreasing liabilities, owners’ equity, and revenues Debit Card: A method of payment that allows a customer to pay for goods and services by transferring money directly from the customer’s bank account to the vendor’s bank account. Payment by debit card is equivalent to payment by cash. Deferred Expense: Assets that are acquired in one period but not expensed, at least in part, until a later period Double-Entry Bookkeeping: An accounting system in which each transaction or economic event is recorded in at least two p
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