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Financial Accounting Flashcards

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Master accounting basics including financial statements, debits/credits, and key accounting principles.

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Accounting flashcards, 37 cards. Hand-written and source-checked. The full set is on this page below.

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Practice Accounting with 6 flashcards using spaced repetition.

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Learning Tips for Accounting

Master Debits/Credits

Understanding debits and credits is foundational.

Learn the Three Statements

Income statement, balance sheet, cash flow.

Practice Journal Entries

Recording transactions builds understanding.

How to Use Flashcards for Accounting

Start with the Basics

Review the flashcard deck to familiarize yourself with key concepts and terminology.

Use Spaced Repetition

Our system schedules reviews at optimal intervals to maximize long-term retention.

Test Yourself

Use quiz mode to actively recall information and identify areas that need more practice.

Practice Daily

Consistent 15-20 minute daily sessions are more effective than long occasional study periods.

Free Accounting flashcards: 37-card starter set

This starter set covers the topics found in a first financial accounting course: the accounting equation, double-entry bookkeeping, the main financial statements, accrual accounting, depreciation, inventory and common ratios. Content follows the standard introductory sequence used by open textbooks such as OpenStax Principles of Accounting, Volume 1. It is not a full course, and it does not cover managerial accounting, tax or detailed IFRS differences.

No signup needed. Progress saves in your browser, and in your account if you sign in. Reviewed 2026-10-17.

The accounting equation and double entry (8)

State the accounting equation.

Assets = Liabilities + Equity. Every transaction keeps both sides in balance.

What are assets, liabilities and equity?

Assets are resources the business owns or controls. Liabilities are obligations to others. Equity is the owners' residual claim: assets minus liabilities.

What does a debit do to assets and to liabilities?

A debit increases assets (and expenses, dividends) and decreases liabilities, equity and revenue. A credit does the opposite.

Which accounts have a normal debit balance?

Assets, expenses and dividends (draws). Mnemonic: DEAD.

Which accounts have a normal credit balance?

Liabilities, equity (including retained earnings and common stock) and revenue. Mnemonic: GIRL.

What is the purpose of a trial balance, and what error does it not detect?

It lists all account balances to check that total debits equal total credits. It does not catch an entry posted to the wrong account or one posted in the wrong amount to both sides.

Why must every journal entry balance?

Double-entry bookkeeping records each transaction in at least two accounts with equal total debits and credits, which keeps the accounting equation in balance.

What is a contra account? Give an example.

An account with a balance opposite to its related account, which reduces it. Accumulated depreciation is a contra-asset; allowance for doubtful accounts is another.

Financial statements (7)

Name the four main financial statements.

Income statement, statement of retained earnings (or changes in equity), balance sheet, statement of cash flows.

Which statement covers a period and which a point in time?

Income statement, equity statement and cash flow statement cover a period. The balance sheet is a snapshot at a single date.

Net income formula

Net income = revenues - expenses (including taxes, interest and any losses).

How does net income connect to the balance sheet?

Net income increases retained earnings (dividends decrease it). Ending retained earnings appear in the equity section of the balance sheet.

Three sections of the statement of cash flows

Operating activities, investing activities, financing activities.

Where do purchases of equipment and loan proceeds appear on the cash flow statement?

Equipment purchases are investing activities. Borrowing money and paying dividends are financing activities.

Current vs noncurrent assets

Current assets are expected to be converted to cash or used up within one year or the operating cycle, whichever is longer. Noncurrent assets are held longer.

Accrual accounting and adjusting entries (7)

Cash basis vs accrual basis

Cash basis records revenue and expenses when cash moves. Accrual basis records revenue when earned and expenses when incurred, regardless of cash timing. GAAP requires accrual accounting.

What is the revenue recognition principle?

Revenue is recorded when it is earned, i.e. when the company satisfies its performance obligation to the customer, not necessarily when cash is received.

What is the matching principle?

Expenses are recorded in the same period as the revenues they helped generate.

Accrued vs deferred items

Accruals: revenue or expense recognized before cash moves (e.g. wages owed). Deferrals: cash moved before recognition (e.g. prepaid insurance, unearned revenue).

Prepaid expense: what type of account and how is it adjusted?

An asset when paid. As time passes, an adjusting entry debits the expense and credits the prepaid asset.

Unearned revenue: what type of account?

A liability, because the company owes goods or services. It becomes revenue as the obligation is satisfied.

What are closing entries for?

They reset temporary accounts (revenues, expenses, dividends) to zero and move the net result to retained earnings, so the next period starts clean.

Depreciation and inventory (7)

Straight-line depreciation formula

(Cost - salvage value) / useful life. It gives the same expense each period.

Double-declining-balance depreciation

Rate = 2 x (1 / useful life), applied to the beginning book value each year (salvage is ignored in the calculation but book value cannot go below salvage).

Units-of-production depreciation

(Cost - salvage) / total expected units, multiplied by the units used in the period. Expense follows usage.

What is book value?

Cost minus accumulated depreciation. It is an accounting figure, not a market value.

Does depreciation provide cash for replacing the asset?

No. Depreciation is a non-cash allocation of cost over time. Cash left the business when the asset was purchased.

Compare FIFO, LIFO and weighted average.

FIFO assumes oldest units sell first. LIFO assumes newest sell first (not allowed under IFRS). Weighted average uses the average cost of all units available.

In rising prices, which method gives higher net income: FIFO or LIFO?

FIFO, because older, cheaper costs go to cost of goods sold, leaving lower COGS and higher income.

Ratios and GAAP principles (8)

Current ratio

Current assets / current liabilities. A liquidity measure of ability to pay short-term obligations.

Quick (acid-test) ratio

(Cash + short-term investments + net receivables) / current liabilities. It excludes inventory and prepaid items.

Debt-to-equity ratio

Total liabilities / total equity. A higher value means more reliance on borrowing.

Gross profit margin

(Net sales - cost of goods sold) / net sales.

Return on equity (ROE)

Net income / average shareholders' equity.

What is the going concern assumption?

Statements are prepared assuming the business will keep operating for the foreseeable future, unless there is evidence otherwise.

What is the cost principle?

Assets are recorded at their original acquisition cost, not at current market value.

What does materiality mean?

An item is material if omitting or misstating it could influence users' decisions. Immaterial items may be handled with simpler methods.

What this set covers

Topics covered

Accounting equation, debits and credits, adjusting entries, financial statements, depreciation, inventory, ratios, GAAP principles

Best used for

Intro financial accounting courses and as a vocabulary check before problem sets

Not covered

Managerial and cost accounting, consolidations, leases, taxes, and CPA-level detail

How to study this set

Accounting rewards doing problems, not rereading. Use the cards to lock in definitions and formulas, then spend most of your time on worked journal entries.

1
Day 1
Learn the equation and the debit/credit rules. Draw a T-account for five simple transactions from memory and check each against the cards.
2
Days 2-7
Review daily. For every new card, make up a transaction that uses it and write the journal entry.
3
Weeks 2-3
Add adjusting entries, depreciation and ratios. Compute each depreciation method by hand on the same asset to see how they differ.
4
Before the exam
Reshuffle everything and quiz yourself aloud on formulas. Turn each homework mistake into one card describing the rule you missed.

Spaced repetition schedules each card to come back just before you would forget it, so reviews get shorter as your recall gets stronger. Cards you miss come back sooner.

Common mistakes to avoid

Treating debit as "bad" and credit as "good"

Debit and credit just mean left and right. Whether a debit increases or decreases an account depends on its type.

Forgetting that expenses and dividends have debit balances

Both reduce equity but are recorded as debits. Mixing dividends up with expenses also affects which statement shows them.

Using the wrong base for double-declining balance

The rate applies to beginning book value, not original cost less salvage. The salvage value only sets the floor.

Confusing cash and profit

A company can report net income and still be short of cash, because accrual accounting separates the timing of revenue from collection.

Make your own from your notes

A starter set is a head start, not your whole course. Your class notes, slides and textbook are what your teacher actually tests, so turn them into cards too.

Put a small transaction on the front ("Paid 1,200 rent in advance") and the journal entry on the back.
For formulas, write the name on the front and the formula plus what it measures on the back.
Avoid cards with full financial statements; make one card per line item or per relationship instead.
Add cards for the situations your professor emphasizes, such as inventory methods in the course's chosen standard.

Generate cards from a topic or notes Turn a PDF into flashcards

Accounting flashcards: questions

What is the quickest way to learn debits and credits?

Memorize the normal balances (assets, expenses and dividends are debits; liabilities, equity and revenue are credits) and practise journal entries daily. Memorizing the rule is fast; fluency comes from repetition on real examples.

Is cash basis accounting allowed under GAAP?

Public companies and most larger businesses must use accrual accounting under GAAP. Small businesses may use cash basis for some purposes, such as tax reporting, depending on the rules that apply to them.

Why does the accounting equation always balance?

Because every transaction is recorded with equal debits and credits across at least two accounts. If the equation is out of balance, there is an error in the entries.

Do these cards cover IFRS?

The set is organized around US GAAP concepts. It flags a few differences, such as LIFO not being permitted under IFRS, but it is not a GAAP vs IFRS comparison.

How many cards per day should I study?

Around 15 to 25 new cards per day plus scheduled reviews works for most students. Keep time for solving problems, since that is where accounting exams are decided.

Sources and review

These cards are an independent study aid, not official exam content, and are not affiliated with or endorsed by any exam body or publisher. They were written by hand and checked against the sources below on 2026-10-17. Always confirm details with your course materials and the current official documents.

OpenStax: Principles of Accounting, Volume 1 (3.2 expanded accounting equation) — Fetched: confirms the accounting equation and that dividends are a debit-balance contra equity account. Other cards are written from standard course content.
OpenStax: Volume 1, 11.3 Depreciation methods — Checked via a search summary of this chapter for the double-declining-balance rule (doubled straight-line rate on book value, floor at salvage). Not read in full.
OpenStax: Principles of Accounting, Volume 2 Managerial Accounting — General reference: companion volume for topics outside this starter set.

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Frequently Asked Questions

Our flashcards cover financial statements, debits/credits, GAAP, and basic accounting principles.

These are fundamentals. CPA requires deeper study, but these flashcards build the foundation.

Basic arithmetic only. Accounting is more about understanding concepts than complex math.

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