Accounting 41 Flashcards

Terms Definitions
Subsidiary
Investee
is land depreciated?
NO
A list of investments
Portfolio
Credits INCREASE (LCRR)
liabilities
common stock
retained earnings
revenue
Relevance
Accounting information is considered this if it would make a difference in a business decision. 
Corporation
A business, owned by stockholders, which is chartered under state law to conduct a business or other activity
account balance
the amount in an account
proprietorship
A business owned by one person
Accounts
The categories under the Assets, Liabilities, and Owner's Equity headings
Income Statement
The financial statement that summarizes the revenues earned and expenses incurred by a business over a period of time.
Inventory
the merchandise you have on hand available for sale
Purchase return
Merchandise returned by the purchaser to the supplier
return on shareholder's equity
net income/avg shareholder's equity
adjusting entries
journal entries recorded to update general ledger accts. at end of fiscal period
Vertical analysis
based on the percentage relationship of each line in the balance sheet to the total.
Book Value
The difference between an asset's account balance and its related contra account balance.
source document
a business paper from which information is obtained for a journal entry
Return on Common Stockholders' Equity
(Net Income-Preferred Dividends)/Average Common Stockholders' Equity
What is Beta?
it's used to determine Stockholders’ expected rate of return on their investments
It measures RISK level
Maker
The individual who makes a promise to pay on a promissory note
Ethics
The principle of right and wrong that guide an individual in making decisions.
Debit Memorandum
A form that explains any deduction, other than a check, from a checking account.
Standard hrs allowed
Actual production x standard hrs unit
General Ledger
a ledger that contains all accounts needed to prepare financial statements
markup
the amount added to the cost of merchandise to establish the selling price
Cost Principle
requires assets to be recorded at original cost because that amount is verifiable.
Reliability
The information can be depended on. In order to do this, accounting information must be a faithful representation of what it purports to beà it must also be factual.
What is working capital?
current assets - current liabilities
avoidable cost
cost that can be eliminated by choosing one alternative over another; also a relevant cost
Closed
an entry on the credit side of an expense account indicates the account has been
drawee
a person sually a bank that has been ordered to make payment on a check or draft is the
Trade discount
a percentage deducted from the list or catalog price of an item
subsidiary ledger
a ledger that is summarized in a single general ledger account
WHAT IS OWNERS EQUITY DEFINED?
WHAT IS OWNED FROM
OWNERS INVESTMENTS
EARNINGS - SERVICE REVENUE OR PROFIT (NET INCOME)
Sole proprietorship
A business that is owned by one person and is not incorporated.
What does FASB do?
Sets both broad and specific principles of accounting.
discount rate
the rate of return that is used to find the present value of a future cash flow
Direct Write-Off Method
Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts.f
Six Classifications of a Sole Proprietorship
Assets, Liabilities, Capital, Revenue, Expenses, Withdrawals
statement of retained earnings
consists of company's net income less any net losses and dividends declared since its inception
W. Avg., WIP Inventory
(EWIP * % Complete) * Unit Cost
sale on account
a sale for which cash will be received at a later date.
What is the fundamental goal of a business?
to generate a profit
standard quantity per unit
the amount of an input that should be required to complete a single unit of product
How do we record accounts recieveable in the balance sheet?
accr debit 30
minus 9 for uncollectible accts
= net acc. rec = 21
DO I HAVE TO FILE TAXES
SINGLE UNDER 65 AND MAKE MORE THAN 8950

MARIED JOINT UNDER 65 17900

HEAD OF HOUSEHOLD UNDER 65 11500
What are the three sections of the statement cash flow?
operating, investing, financing (OIF)
D
Decrease on the
I
increase on the
Strait-line depreciation=
(acquisition cost-salvage value)/life
GAAP
Generally Accepted Accounting Principles concepts and rules that govern financial accounting
IASB
International Accounting Standards Board
FASB
Financial Accounting Standards Board
Business Transactions
represent an exchange.
How do you compute interest?
I=PxRxT
Expenses
Always decrease the owner's equity.
Strait line Depreciation=
(aquisition cost-salvage value)/life of asset
Debt-to-equity ratio=
total liabilities / stockholders equity
balance sheet
describes a company's financial position at a point in time
Net income
Revenue earned minus operating expenses.
Managerial accounting
Provides information for internal users
Depreciation
when original cost of asset is depreciated over its useful life
going concern principle
accounting information reflects the assumption that the business will continue operation, not close or sell
Income statement
describe a company's revenues and expenses along with the resulting net income or loss over a period of time
Liabilities
Amounts owed to people outside the business from business operations which include accounts payable, interest payable, taxes payable, and salaries payable.
Matching concept
The basis around which accrual accounting operates. It recognizes expenses in the fiscal period in which they are incurred, not paid.
t-account
Most common method used to analyze business transactions.
Financial accounting
Provides information for uses outside of the company
Accounting
The language of business. It provides information that is needed about the monetary activities of a business, processes that information into useful reports called financial statements and communicates the results to the people who need them.
current liabilities
liabilities that will be paid off within the fiscal year of the company
Trial Balance
A listing of accounts, with their balances, from the general ledger. The accounts are listed in numerical order. The total of the debit column and credit column must be equal.
Sole proprietorship
Type of business ownership with only one owner.
Revenue recognition
Recording revenue in the period in which it is earned, not when the cash is received, when using the accrual basis of accounting.
Creditor
Someone who has a claim against the assets of a company.
Balance side
The side of the accounting equation that an account would appear on, in which it determines whether the account has a normal debit balance or a normal credit balance.
Return on assets=
net income+int exp or tax/ average total assets
statement of cash flows
identifies cash inflows (receipts) and cash outflows (payments) over a period of time
owner's withdrawls
assets on an owner takes from the company for personal use
3 Basic financial Statements
income statement, statement of owner's equity and the balance sheet
Cash basis of accounting
Recording revenues and expenses when cash exchanges hands and not considering when the revenue was earned or the expense incurred.
General Journal
The first formal book that a business transaction is written in, considered the book of original entry. It is kept in date sequence and shows the results of the analysis of business transactions into debits and credits.
What is amortization?
The measure of the amount of money that goes out of an intangible asset as it is used over time
What is depreciation?
The measure of the amount of money that goes out of a tangible asset as it is used
Closing process
The procedure needed at the end of an accounting cycle to prepare for the next accounting cycle.
Assets
Items that can be owned and may be in the possession, use of or control of the business, these items have future economic benefit to the company such as cash, supplies, land, equipment, and accounts receivable.
What are the characteristics of a capital lease?
title transfere, long term, depreciation is accounted for, lease is shown as an asset or liability on balance sheet
The three w's
The three parts to the heading of all financial statements - who, what , and when
Withdrawals from the business, by the owner
withdrawals always decrease the owner's equity
What is the relationship between cost, accum depreciation, gain/loss and cash rec'd?
accum depreciation is subtracted from initial cost, gain/loss is the book value-sale price
What is a drawing?
It is a withdrawal by the owner for personal use.
What is the relationship between, bond interest rates, market yield rates and bond pricing at a premium/discount?
market rate=face rate then bond is issued at face/par value, market rate > face rate then bond is issued at a discount, market rate < face rate then bond is issued at a premium
What do retained earnings represent for a company?
Part of the net income that is not paid out to stockholders as dividends
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