accounting one Flashcards

Terms Definitions
fixed cost+OPY=
Contribution Margin
increase in owners equity
Assets, Expenses, Dividens Money coming in is Debit
Current Ratio
Current Assets / Current Liabilities
a record summarizing all the information pertaining to a single item in the accounting equation
Four steps in accounting
collection, measurement, classification, presentation
an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities.
stockholders equity
ownership claim on total assets
Opportunity costs
Cost of not doing something
"A present obligation of the entity resulting from a past event, where its settlement will result in an outflow of future economic benefit" Like an I.O.U
-Past transaction
-Present Obligation
-Future Settlement (Outflow of economic benefit)
accounting equation
an equation showing the relationship among assets liabilities and owners equity
Income sttement
Advertising expense would be reflected on the
account title
the name given to an account.
The usual denomination of a bond is
Balance of the Account
Amount of an account
Owned by one individual and comprise 70% of business organizations in US. Cost of Organizing low, limited to financial resources of owner, Small Businesses
Common reasons for differences
Deposits in Transfer
Outstanding checks
service charges
collections collected
not sufficient funds
the amount added to the cost of merchandise to establish the selling price
outstanding checks
checks that have been drawn and subtracted from the depositor's checkbook, but which have not yet been presented to the bank for payment
sales return
any merchandis returned for credit or cash refund.
unearned revenues
cash is received before revenue is earned. opposite of prepaid expense
owner investment
assets an owner puts into the company
proving cash
determining that the amont of cash agrees with the balance of the cash account in the accounting records
the principles you live by and the beliefs that are important to you.
Free Cash Flow
describes the cash remaining from operating activities after adjusting for capital expenditures and dividends paid.
Date of record
Shareholders' names listed at this time on the secretary of the corporation's record will receive dividends declared on date of declaration.
18. The journal entry to close revenue accounts includes
a. debiting the revenue accounts and crediting Income Summary
b. debiting the Income Summary and crediting the revenue account
c. debiting the revenue accounts and crediting Cash
d. debiting the
Current Asset Ratio
The comparison of current assets with current liabilities
wholesale merchandising business
a business that buys and resells merchandise to retail merchandising businesses
A form on which a brief message is written describing a transaction
straight-line method
assumes an equal using-up of the asset over time
Statement of cash flows
Cash from operatiing, investing, and financing activities
fiancial statements
length of time for a business summary and reports financial information
Political cost hypothesis
the greater the exposure to political costs, the more likely managers are to use negative discretionary accruals.
Return on Assets Ratio
Net Income ÷ Average total assets
Historical Cost Principle
assets must be reported in the balance sheet at their original cost
Federal Unemployment Tax
A federal tax used for state and federal administrative expense of the unemployment program
first-in, first-out inventory costing method
using the price of merchandise purchased first to calculate the cost of merchandise sold first
The financing period
The time period from the purchase of inventory until it is ultimately sold and collected less the amount of time creditors give the company to pay for the inventory; also called cash gap. This is the period of time the company will be without cash from a particular series of transactions. The company will need to have fund available or borrow from the bank. This is why cash flow management is important.
What are expenses (outflows)?
decreases in owners' equity that arise because goods or services are delivered to customers
when using the indirect method, depreciation expense
increases net cash flow from operations
The equity method of accounting for investments in voting common stock is appropriate when:
the investor can significantly influence the invetee
The entry is complete
a double line under the last entry on a T-account means
6 Sections of an Income Statement
1. Heading2. Revenue3. Costs of Goods Sold4. Gross Margin (rev - cogs)5. Expenses6. Net Profit (AKA Income) (rev-all expenses or gm - other expenses)
Admin involvement in the grants if for example:
a. monitors secondary recipients for compliance with program-specific requirements. b. determines eligibility of secondary recipients9 (even if using grantor-est. criteria c. has ability to exercise discretion when allocating the funds
True or False- In a standard cost system a company adds the actual cost of direct labor to the goods in process account because it uses actual cost to record wages payable.
False- The standard cost system is the standard of an input multiplied by its price.
Notes Receivable
Promisary Note
Long-Term Investments
-bond investments
-long-term receivables
-land held for resale
direct costs
parts, assembly line wages
Operating Activities
Revenues, sales, service, interest
Accounts Receivable
Accounts Payable
an inspection of the accounting procedures and records by a trained accountant or CPA
beliefs that distinguish right from wrong
The quality of information that indicates the information makes a difference in the decision making process
Debt to Total Assets
Total Liabilities/Total Assets
The Financial Statements
Income statement, Statement of retained earnings. Balance sheet
Inventory Sheet
Form listing information about a physical inventory
a decrease in owner's equity resulting from the operation expenses
Sales = variable expense + Fixed expense + profit
a form of recording transactions in chronological order
product costs
Costs associated with products or services offered.
plant assets
Long-lived assets, such as land, buildings, and equipment, used in the operation of the business. Also called fixed assets
stock split
distribution of additional shares to stockholders according to their percent ownership
Capital lease
transfers risks and benefits of ownership; therefore record asset and liability
Cash Receipts Journal
For receiving cash for merchandise; used to record the receipt of cash
Specific Identification
The method of inventory costing in which each item is tracked and recorded according to its purchase and sale price.
allowance method
a method for uncollectible accounts by expensing estimated uncollectible accounts in the period in which the related sales take place.
net sales
Total sales less sales discount and sales return and allowances
Subsidiary ledger
Contains the details related to a given general ledger accounts
interest expense
this accrues each year on the projected benefit obligation just as it does on any discounted debt
A from saying how many allowances they have
Post-closing Trial Balance
Balance sheet accounts whose balances are carried forward to the next accounting period
What is a transaction?
contract between buyer and seller
disadvantages of decentralization
lower level management may not comprehend overall company strategy when making decisions; lack of coordination can result; lower level management objectives may conflict with overall company objectives; innovative ideas may be difficult to spread across the company
an entry on the debit side of the owners equity indicates that the account has been
managment accounting
The type of accounting that focues on reporting information to management,often referred to as accounting for internal users of accounting information.
Cost of inventory
Direct materials + Direct labor + Manufacturing overhead
closing process
an important step at the end of accounting period after the financial statements have been completed. prepares accounts for recording the transactions and events of the next period.
1. identify accounts for closing
2. record and post closing entries
3. prepare a post-closing trial balance
Checking Account
A bank account from which payments can be ordered by a depositor
Chart of Accounts
list of accounts used by a business
Accrued Revenue
revenue earned but not yet received or recorded
Property. Plant, and Equip.
assets with relatively long useful lives that a company is currently using in operating the bus.
Total Earnings
the total pay due for a pay period before deductions
Post Closing Trial Balance
a trial balance prepared after the closing entries are posted
Total Cost of WIP
(Beg WIP Inv) + (Total Man. Costs)
On the Bank Reconciliation the Interests are:
Added to the Book Balance
Market Rate of Interest
Also called yield, effective rate. The rate demanded by the market.
matching revenue with expenses
the amounts for the next fiscal period would be added to amounts for previous fiscal periods
Economic Entity Assumption
the activities of the entity are to be kept separate and distinct from the activities of its owner and all other entities
which of the following items would reduce retained earnings
common stock dividend, preferred stock dividend, and cash dividend
A company pays its hourly employees $3,500 for a five day work week each Friday. December 31, the end of the company's fiscal year, falls on Tuesday. The adjusting entry on December 31 would be?
Increase wages expense $1,400 and increase wages payable $1,400.
Impact of Operating Lease on the Cash Flow Statement (Lessor)
-each lease payment received is reported as "OPERATING CASH FLOW INFLOW"
The number of shares of a class of stock that are outstanding is
the number of shares issued minus the number of shares held in the treasury
notes payable
written authorization; credential.
Feedback Value
Information confirms expectations.
Fees Earned
Revenue, Income Statement, Credit
Working capital is a measure of
managerial accounting
provides information for internal users
generates specific purpose statements and reports
set up for future orientated reports
not subject to external standards
subjective data and using estimated firues
Reversing Entries
After preparing the financial statements and closing the books, a company may reverse some of the adjusting entries before recording the reqular transaction of the next period.
Expense recorded when incurred, not when cash paid
The best choice among accounting alternatives is the method that is least likely to overstate assets and net income.
Accounting System
designed to collect, document, and report on financial transactions affecting the business.
cost approach
amount that currently would be required to replace an asset.
the ability to help users see similarities and differences among events and conditions
Accounts Payable
Amounts that you owe to vendors
Financial Accounting
The process of generating and communicating accounting information in the form of financial statements to those outside the organization.
a stream of cash flow with the property that the cash flows per period.
Activity dictionaries
A compete listing of the activities identified in an ABC system
Separate Entity Assumption
Activities of the business are separate form activities of the owners.
T account
an accounting device used to analyze transactions
Customers of a busines that owe the firm money becuase they have been sold goods or services on credit.
Fixed Asset Turnover
Net Sales / Average Fixed Assets
What costs should be included in the initial purchase of a LLA?
Temporary declines in the fair value of an available for sale security
unrealized losses
Computer Software Expense
Expense software development costs as incurred.
External Controls
The controls on cash from outside the business
Long Term investments
investments in stock and bonds of other corperations that are held for more than one year, and long-term assets such as land or buildings that a company is not currently using in its operating activities
retained earnings
an amount earned by a corporation and not yet distributed to stockholders
correcting entry
a journal entry made to correct an error in the ledger
Accounting Period
The time span covered by the financial statements. Usually one year, a quarter, or a month
Accrued revenues
refer to revenues earned in a period that are both unrecorded and not yet received in cash (or other assets). commonly result from services, products, interest, and rent.
Aging of Accounts Receivable Method (debt estimation)
estimates uncollectible accounts based on the age of each account receivable
2 costing systems
1. process costing 2. job order costing
cash over
petty cash on hand amount that is more than a recorded amount
Opening An Account
Writing an account title and number on the heading of an account
CERT, CISO, patch mgmt system
three major corrective controls used in security
remittance list
list of the checks that have come in on that day; check number, payer and the amount
prepared in Mailroom, forwarded to Cash Receipts, A/R, and controller
Owner's Equity
An ownwer's claim to the assets of a business; in other words, how much money the owner has invested.
Weighted Average Unit Cost
Average cost that is weighted by the number of units purchased at each unit cost.
Uniform Commercial Code (UCC)
The Uniform Commercial Code is a large set of business laws that clarified and modernized many laws relating to commercial transactions.
credit card sale
A sale in which a credit card is used for the total amount of the sale at the time of the transaction
What is the gross profit percentage?
useful to retailers in choosing a pricing stragegy and judging results

gross profit / sales
How does an investor estimate the average age of an asset?
by computing the percentage of the original cost that has been depreciated
When a company issues bonds to raise necessary capital, how does it work to the company?
It is a form of debt financing of the company. Therefore, the purchaser becomes the liability holder of the company.
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