Accounting 101 Test Chp. 4 & 5 – Flashcards

A. Merchandise Inventory B. Cost of Goods Sold C. Sales Revenue D. All of the above

A. returns and allowances. B. purchase and sale. C. perpetual and periodic. D. cash and accrual.

Merchandise Inventory Accounts Payable

Balance sheet that places each asset and liability into a specific category

Measure of how quickly an item can be converted to cash

Asset that's expected to be converted to cash, solid, or used up during next 12 months or within the business's normal operating cycle if the cycle is longer then 1 year Cash, accounts receivable, office supplies, prepaid expenses

Time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash

Asset that will be converted to cash or used up within the business's operating cycle or 1 year, whichever is greater Long term investments Plant assets Intangible assets

Investments in bonds (debit securities) or stocks (equity securities) in which the company intends to hold the investment for longer then 1 year Notes payable

Long lived, tangible asset, such as LAND, BUILDING, and EQUIPMENT, used in operation of a business (Listed in order of liquidity)

Asset with no physical form that is valuable because of the special right it carries Patents, copyrights, trademarks

Liability that must be paid with cash or with goods and services within 1 year or within the entity's operating cycle of cycle is longer then 1 year Accounts payable, notes payable due within 1 year, salaries payable, interest payable, and unearned revenue (Listed in order that they're due)

Liability that DOESN'T need to be paid within 1 year or within the entity's operating cycle, whichever is longer Notes payable (mortgage on something)

Step in accounting cycle that occurs at end of period Journalizing and posting closing entries to set the balances Revenues, expenses, income summary, and owner withdrawal accounts (Zeros out all^)

Account that relates to particular accounting period and is closed at end of period Revenues, expenses, incomes summary, and owner withdrawals

Account that's not closed at end of period Asset, liability, and owner capital

Entries that transfer the revenues, expenses, and owner withdrawals balances to owner capital account to prepare the company's books for the next period

Temporary account into which revenues and expenses are transferred prior to their final transfer into the owner capital account Summarizes net income or loss for the period

List of accounts and thief balance at end of period after journalizing and posting closing entries ONLY permanent accounts

Process by which companies produce financial statements for a specific period

Measures company's ability to pay current liabilities from current assets Total current assets/ Total current liabilities

Special journal entry that eases the burden of accounting for transactions in next period Switches debit and credit of previous entry Exact opposite of prior adjusting entry

Business that sells merchandise or goods to customers

Merchandise that business sells to customers

Type of merchandiser that buys goods from manufacturers and then sells them to retailers

The individual or business from whom a company purchases goods

Type or merchandiser that buys merchandise either from a manufacturer or wholesaler and then sells those goods to consumers

Cost of merchandise inventory that the business has sold to customers

Expenses of net Sales Revenue - COGS

Expenses, other then COGS, that are incurred in entity's major ongoing operations

An inventory system that requires businesses to obtain a physical count of inventory to determine quantities on hand.

An inventory system that keeps a running computerized record of merchandise inventory

Seller's request for payment from purchaser

Discount that businesses offer to purchase as an incentive for early payment

Payment terms of purchase or sale as stated on invoice

Situation which sellers allow purchasers to return merchandise that's defective, damaged, or unsuitable

Amount granted to purchaser as incentive to keep goods that are not "as ordered"

Buyer takes ownership to goods after goods leave sellers place of business

Buyer takes ownership to goods at delivery destination point and seller pays freight

Transportation cost to ship goods into purchaser's warehouse (freight in purchased goods)

Transportation cost to ship goods out of seller's warehouse (freight on goods sold to customer)

Amount that merchandiser earns from selling inventory Two entries: 1) Cash Sales revenue Cash sale 2) Cost Of Goods Sold Merchandise Inventory Recorded COGS

Reduction in amount of cash received from a customer for early payment

Decrease in seller's receivable from customer's return of merchandise or from granting the customer an allowance from amount owed to seller

Amount company has earned on a sales of merchandise inventory after returns, allowances, and discounts have been taken out Sales revenue - sales returns and allowances - sales discounts

Loss of inventory that occurs because of theft, damage, and errors

Groups all revenues together, lists, and deducts all expenses together without calculating any subtotals

Contains subtotals to highlight significant relationships Reports net income, gross profit, and operating income

Expenses related to marketing and selling the company's goods and services

Measures results of entity's major ongoing activities Gross Profit - Operating Expenses

Outside the normal operations of business EX. gain/loss on sale of plant assets or interest expense

Measures profitability of each sales dollar above COGS Gross Profit / Net Sales Revenue

Purchase - purchase returns and allowances - purchase discounts