Accounting Chapter 5 definitions

Accounting Chapter 5 definitions - Accounting Chapter 5...

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Unformatted text preview: Accounting Chapter 5 definitions Statement of cash flows- one of the basic financial statements that reports the cash receipts and cash payments of an entity during a particular period and classifies them as financing, investing, and operating flows. Cash equivalents- highly liquid short-term investments that a company can easily and quickly convert into cash, such as money market funds and Treasury bills. Operating decisions- decisions that are concerned with the major day-to-day activities that generate revenues and expenses. Cash flows from operating activities- the first major section of the cash flow statement, it helps users evaluate the cash impact of management’s operating decisions. Operating activities- transactions that affect the purchase, processing, and selling of a company’s products and services. Financing decisions- decisions concerned with whether to get cash or repay debt. Cash flows from financing activities- the section of cash flows that helps users understand management’s financing decisions. Financing activities- a company’s transactions that obtain resources as a borrower or issuer of securities or repay creditors or owners. Investing decisions- decisions that include the choices to (1) acquire or dispose of plant, property, equipment, and other long-term production assets, and (2) provide or collect cash as a lender or as an owner of securities. Cash flows from investing activities- the section of the statement of cash flows that helps users understand management’s investing decisions. Investing activities- transactions that acquire or dispose of long-lived assets. Direct method- a method for computing cash flows from operating activities that subtracts operating cash disbursements from cash collections to arrive at cash flows from operations. Indirect method- a method for computing cash flows from operating activities that adjusts the previously calculated accrual net income from the income statement to reflect only cash receipts and cash disbursements. Free cash flow- generally defined as cash flows from operations less capital expenditures. Chapter 6 Percentage-of-completion method- method or recognizing revenue on long-term contracts as production occurs. Sales returns ( purchase returns)- products returned by the customer. Sales allowance ( purchase allowance)- reduction of the original selling price. Gross sales- total sales revenue before deducting sales returns and allowances. Net sales- total sales revenue reduced by the sales returns and allowances. Trade discounts- reductions to the gross selling price for a particular class or customers. Cash discounts- reductions of invoice prices awarded for prompt payment....
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This note was uploaded on 04/29/2008 for the course ACCT 151 taught by Professor Largay during the Spring '07 term at Lehigh University .

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Accounting Chapter 5 definitions - Accounting Chapter 5...

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