Accounting 3 Flashcards

Terms Definitions
The revenue recognition principle dictates that revenue should be recognized in the accounting period in which it is
a. collected.
b. earned.
c. most likely to be collected.
d. earned and collected.
b. earned.
The common charactereistic possessed by all assets is:
future economic benefits
Relevant accounting information is:
information that is capable of making a difference in a decision.
Which of the following is a payroll function?
a. Hiring employees.
b. Timekeeping.
c. Preparing and paying the payroll.
d. All of the above.
d. All of the above.
An income statement:
a. Summarizes the changes in stockholders’ equity for a specific period of time.
b. Reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
c. Reports the assets, liabilities, and stockholders
d. Presents the revenues and expenses for a specific period of time.
The basis used to classify assets as current or noncurrent is:
a. Whether the asset is currently used in the company's operations.
b. Whether an asset is monetary or nonmonetary.
c. The operating cycle or one year, whichever is shorter.
d. Usually one ye
d. Usually one year, because the operating cycle typically is less than one year.
sales discounts
contra revenue
generaly accepted accounting principles
Balance Sheet
Statement of Financial position
accounts payable
liability, balance sheet, credit
is a business document--or electronic transmission--used to notify the customer of an obligation to pay the seller for the merchandise ordered and shipped.
an inventory costing method that assumes that the cost of the latest units purchased are the first to be allocated to cost of goods sold
All the activities necessary to provide the members of an economic system with goods and services
losses should be recorded when probable, but gains only when certain so that liabilities and expenses are not understated and assets and revenues are not overstated.
Equity contains
Contributed Capital and Retained Earnings
pecuniary gain resulting from the employment of capital in any transaction.
a buisness from which merchandise is purchased or supplies or other assets are bought
Journal Entry
An accounting method expressing the effects of a transaction on the debit=credit format
file maintenance
The procedure for arranging accounts in a general ledger, assigning account numbers and keeping records current.
a business with two or more owners
A business from which merchandise is purchased or supplies or other assets are bought.
General Ledger
Ledger that contains all accounts needed to prepare financial statements.
Stockholders' Equity
The owners equity in a corporation
temporal method
assets and liabilites on foreign currency BS at current value should be translated at the current exchange ratem while A&L at historic costs should be translated at historic exchange rate
income earned from the sale of goods and services.
gross profit percentage
gross profit divided by net sales
service business
A business that performs an activity for a fee.
Scrap value
That portion of a plant assets original cost that cannot be depreciated is called
Longterm liabilities
debts and obligations that will be paid after 1 year or op cyc ex. mortages payable, bonds payable
Limited Partnership
Partnership that has two classes of partners; limited partners and general partners.
Utilities on the office building are a...
period cost
Retained earnings Statement
 begining retained earnings
+ net income - dividends
= Ending retained earnings
balance sheet
a list of the assets, liabilities, and owners' equity as of a specific date, usually at the close of the last day of a month or a year
The Capital account in the last two columns of the work sheet is an up-to-date account and includes net income and withdrawals of the current period.
The face value of a note on which interest is computed
Accural basis accounting
uses the adjusted process to recognize revenues when earned and expenses when incurred (matched w/ revenues)
Sales Invoice
An invoice used as a source document for recording a sale on account.
The matching principle:
Is used in accrual accounting to determine the proper period for recognition of expenses.
Methods for calculating depreciation
straight line method; double declining balance; activity method
Carrying Value
The unecpired part of an asset's cost. Also called book value
Full disclosure Principle
circumstances and events that make a difference to financial statement users should be disclosed
An amount recorded om the left side of a T account
limited Liability Company or LLC
Form of business organization with limited liability and has pass-through tax advantages
Cash receipts Journal
a special journal used to record ONLY cash receipt transactions
unexpected asset gain or loss
The difference between the actual return on plan assets and the expected return on plan assets is the
The Financing Period steps
1. Inventory is purchased on credit (Accounts payable)
2. Terms for payment are 30 days (cash is paid)
3. Average days to sell inventory is 60 days - sol on credit (Accounts recievable)
4. Average days to collect on recievables is 60 days (cash is recieved.
What is a fiscal year?
the year established for accounting purposes
sales tax
a tax based on the cost of the item purchased and collected directly from the buyer
Adjusting entries bring the accounts up to date before the financial statements are prepared. Closing entries close the temporary accounts so that they can begin the next accounting period with zero balances.
What is the difference between adjusting entries and closing entries?
carrying (book) value of bonds
net amount at which bonds are reported on the balance sheet; equals the par value of the bonds less any unamortized discount or plus any unamortized premium
In order for a corporation to pay a cash dividend what are the 3 things it must have?
retained earnings
adaquate cash
a declaration of dividends
What are the basic methods of accounting for warranty costs?
the cash-basis method and the accrual method.
Which of the following is not an asset account
None of the above is an asset
accelerated depreciation
more depreciation
Wage and tax statement.
Planning, recording, analyzing, and interpreting financial information
Current ratio
The relationship between current assets and current liabilities; calculated by dividing current assets by current liabilties.
Are economic resources with probably future benefits owned by the entity as a result of past transactions
A = L + OE
Recognition of revenue or expense after cash has been paid or collected
Blacconiere and Patten
Environmental disclosure. accident produced a negative effect on the industry due to future regulatory costs. Also found that firms with greater disclosures had less of a negative effect.
Purchase Account
A temporary owner's equity account that is used to record the cost of merchandise purchased for resale. Other possible titiles include Merchandize Purchases or Purchases of Merchandise.
net assets
the difference between assets and liabilities
amount recorded in the right amount column of the general journal
Indirect Method
The procedure for converting the income statement from an accrual basis to a cash basis by adjusting net income for items that do not affect cash flows, including depreciation, amortization, depletion, gains, losses, and changes in current assets and current liabilities.
represents the amounts that have been earned by the business
Accumulated depreciation
sum of all depreciation expense recorded to date for an asset
Asset, Balance Sheet and Statement of Cash Flows, Debit
Income Statement
A financial statement showing the revenue and expe
Owner's Equity
The amount remaining after the value of all liabilities is subtracted from the value of all assets
Profitablitlity ratios
measures the operating success of a company for a given period of time
large stock dividends tend to
keep stock prices down
figuring out how much a future amount is worth today
Purchases Allowance
Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer's accounts payable.
assests taken out of a business for the owner's personal use
Income Statements
Balance Sheet
Statement of Cash Flow
Statement of Returned earnings
These four financial statements should be produced and included in companies yearly reports.
direct labor
refers to the earnings of employees who work directly on the products being manufactued
Bookkeeping / Recordkeeping
The recording of transactions and events
labor efficiency variance
compares the amount of time budgeted for volume of production to amount of time it actually took to produce
accounting period
A period of time covered by an accounting report
The totaling of a column of a journal or ledger is called
Debit Withdrawl, Credit Cash
Show w/drawl from your own business.
profit and loss Statement (P&L) (income statement)
Gewinn und Verlust Rechnung
The beginning balance in the Warranty Payable account was $50,000. Sales were $900,000 and warranty costs were estimated at 7% of sales. During the year, $55,000 was paid to settle warranty claims. As a result of these transactions, what is the amount of
B) 63000, 58000
Typical Examples of Adjusting Entries
Inventory, Salary, Prepaid Expenses, Depreciation
Price Standard
cost that a company should incur to acquire one unit of input for a manufacturing process
Callable bonds
Bonds that can be redeemed at any time at a specified price by the issuing company (borrowing company)
DM quantity variance
(Materials used x SP) - (SH x SR)
Cost of Goods Manufactured schedule
A schedule supporting the income statement that summarizes the total cost of goods manufactured and transferred out of the work-in-process inventory account during a period. These costs include direct materials, direct labor, and applied manufacturing overhead.
Investment pools, each participant receives a
proportionate share of the pool's investment income, g/l, unrealized g/l
Time period assumption
an assumption that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business
What is the Contribution formula?
Sales revenue - Variable costs per unit
Stmt of plan net assets
not classified re current, long term (assets; liab.; net assets held in trust)
amounts paid out of the petty cash account must be journalized and recorded in the general ledger accounts when ...
the petty cash is replenished
What is a stockholder?
A person that owns a stake in a company
Which is the correct order of the steps in the accounting cycle at the end of the accounting period?
Prepare a trial balance, journalize and post adjustments, prepare financial statements, and journalize and post the closing entries
True or False: Job cost systems exist solely to aid and all the \"bean counters\" (accountants) to report for financial and tax purposes.
True or False: Gross Profit Margin is an account that appears on the books of a construction company.
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