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CASH
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CURRENT ASSET
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Posting
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After Journalizing
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Average Cost Method
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uses the weighted average unit cost of the goods available for sale for both cost of goods sold and ending inventory.
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Average Cost Method
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2
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OFFICE EQUIPMENT
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PROPERTY,PLANT, AND EQUIPMENT
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indenture
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contract that undergrids a bond
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INVESTMENT IN REAL ESTATE
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LONG-TERM INVESTMENTS
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Comparability
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Ability to compare the accounting information of different companies because they use the same accounting principles.
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GP rate
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= gross profits/ net sales
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expenses
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the costs incurred to generate revenue
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Liquidity
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The ability to pay current obligations
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Amortization
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Systematic and rational allocation of the acquisition cost of an intangible asset over its useful life.
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Amortization
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2
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Corporation
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Ownership in shares of stock
Separate legal entity organized under state corporation law
No personal liability
Easier to raise funds
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Current assets
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Cash and other resources that companies expects to convert to cash or use up within one year or the operating cycle, whichever is longer.
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Comparative statements
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Comparative statements allow users to compare the financial results of the business from one accounting period with those of previous periods.
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Operating activities
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Business activities that involve using the business's resources to implement its business emphases.
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Current Ratio
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= current assets / current liabilities
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contributed capital
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an owner's investment in a company
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Liabilities
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Probable debts or obligations of the entity that result from past transactions, which will be paid with assets or services
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Merchandise Inventory
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includes all purchases of merchandise for RE-SALE to customers and costs to get it to the business AND make ready for sale.
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financial accounting
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branch of accounting concerned with preperation of financial statements for outsider use
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current liabilities
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debts that a company reasonably expects to pay from existing current assets within the next year or operating cycle
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accounts payable
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a liability account that identifies an obligation to pay suppliers in the near future
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Common stock
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total amount paid in by stockholders for the shares they purchase.
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Depreciation
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The process of allocating the cost of a long-term tangible asset over its useful life.
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small stock dividend
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company issues additional stock that is less
than 20-25% of its outstanding shares.
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monetary unit
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the yardstick used to measure amounts in finacial statements; the $ in the US
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Declining-balance method
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A depreciation method that applies a constant rate to the declining book value of the asset and produces a decreasing annual depreciation expense over the asset's useful life.
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deferral
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a transaction in which the cash is exchanged before the revenue is earned or the expense is uncurred
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managerial or management accounting
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provides internal users with infomration. Object is to provide relevent and timely info for managers' and employees' decision-making needs, often it isn't distrubuted outside business because it is sensitive information (private accounting)
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the 2 components of contributed capital
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-common stock
-paid-in capital
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The investment of cash and other assets by the owners of the company into the business is called what?
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CONTRIBUTED CAPITAL
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What Dividends In Arrears?
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Dividends on cumulative preferred stock that have not been declared in prior years.
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Revenues
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Earned by selling goods or services to customers
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Days in Inventory Ratio
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365/ Inventory Ratio Turnover
365/ (Cogs/avg inventory)
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Corporations disadvantages? (3)
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Greater tax burden (double tax), gov regulations, absentee ownership
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Current assets are
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assets that a company expects to convert to cash or use up within one year or its operations chycle, whichever is longer.
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Bondd principal
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The amount of money payable at the bond's maturity
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statement of retained earnings
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statement that summarizes the income earned and dividends paid over the life of a business
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corperation
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a special legal form for a business in which the business is a legal entity seperate from the owners, it may have a single owner or a large number of owners
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Accured expense
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An expense that has been incurred at the end of an accounting period but has not been recorded in the accounts; sometimes called an accrued liability.
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declaration date
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the date on which the board of directors officially approves a divident
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__________ is an accounting method for expressing the effects of a transaction on accounts in DEBIT-EQUAL-CREDITS format.
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A JOURNAL ENTRY
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Future Value
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The sum to which an amount will increase as the result of compound interest.
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Future Value
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7
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allowance method
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a method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period
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Public Company Accounting Oversight Board (PCAOB)
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The group charged with determining auditing standards and reviewing the performance of auditing firms.
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Callable bonds
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h may be "called in" by the company for early retirement, before
their maturity date.
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off balance sheet financing
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The international effort by a company to structure its financing arrangements so as to avoid showing liabilities on its books.
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Days in Inventory
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measure of the average number of days inventory is held; calculated as 365 divided by inventory turnover ratio
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Work In Progress Inventory
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Goods in the process of being manufactured
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What are relevant economic events?
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have economic significance to a particular company and include any occurrenece that affects its financial condition. (signing of new labor agreement, hiring of new CEO, sale of an item of inventory, payment of monthly wages...)
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When companies write off specific uncollectible accounts,
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Companies
DEBIT Allowance for Doubtful Accounts
CREDIT Accounts Receivable
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Capital Asset Pricing Model
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Allows a firm to forecast the expected rate of return and potential risk on any capital investment. Expected Return = Risk Free + B (Mkt Risk - Risk Free)
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Profit Margin Ratio/What can alter this??
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Net Income/ Net Sales(Percentage of "mark-up" on merchandise sold)
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Debt to total assets ratio (p. 60)
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Measures the percentage of total financing provided by creditors; computed as total debt divided by total assets.
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What happens when cash is received before the goods or services are delivered?
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No revenue is recorded.Records a liability account (unearned...something)
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What should be included as Inventory?
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Items and only those items, legally owned by the business. Inventory should include all goods that the company owns, regardless of their particular location at the time.
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What are the two basic sources of stockholder's equity?
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(A)Contributed Capital - The amount invested by stockholders through the purchase of stock. (B) Retained Earnings - The accumulated amount of all net income since the organization of the corporation, less losses and less the accumulated amount of dividends paid by the corporation since organization.
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What is the FASB and who made it?
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The FASB is the Financial Accounting Standards Board, set in place by the SEC, and given the responsibilities of working out the detailed rules that become GAAP (generally accepted accounting principles).
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What two ways does LIFO Vs. FIFO affect the income statement?
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(1)The amount of cost of goods sold and (2)income. When prices are rising, FIFO will give a lower cost of goods sold amount and hence a higher income amount than will LIFO. In contrast, when prices are falling, FIFO will give a higher cost of goods sold amount and, as a result, a lower income amount.
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