question

A=L+SE describes the company's economic resources, obligations, etc, at a given point in time

answer

balance sheet

question

Revenue - expenses = net income describes financial performance over a period of time. net income is transferred to retained earnings at the end of each accounting period

answer

income statement

question

cash flows from operating activities- running a business to earn profit cash flows from investing activities- involve buying/selling productive resources with long lives (buildings, land, equipment) purchase investment, lend to others cash flows from financing activities- borrow from bank, repay loans, receive cash from stockholders, pay dividends

answer

statement of cash flow

question

helps ensure comparability of financial information across companies and accounting periods

answer

generally accepting accounting principle (GAAP)

question

when a company owes money to a business or individual

answer

creditors

question

a person who gives a loan expecting financial money in return

answer

investors

question

assets and liabilities should be initially recorded at the original cost to the company

answer

historical cost principle

question

when a business/organization and its owners are treated as two separate identifiable parties

answer

entity concept

question

debit what a person receives ex furniture, car, cash, books

answer

assets

question

credit what a person owes the bank

answer

liabilities

question

debit decreases assets increases liabilities only on income statement

answer

expense

question

credit increases assets

answer

revenue

question

indicates the effects of each days transactions in a debits=credits format

answer

journal entry

question

simplified version of the overall companies transactions used for summarizing effects of journalized entries

answer

t-accounts

question

to ensure equal debits and credits

answer

double entry bookkeeping

question

most effective because it provides a better measure of profits arising from the company tells you the companies profits at any given time reports revenue when earned and expenses when incurred regardless of timing of cash receipts or payments always up to date

answer

accrual basis

question

only tells you companies profits once cash is received reports revenue when cash is received and expenses when cash is paid not allowed under GAAP

answer

cash basis

question

positive incentives can influence people to pay sooner

answer

incentives management of companies has to manipulate financial statements

question

when in doubt, understate the good, overstate the bad

answer

conservative accounting practices

question

updates periodically and inventory is physically counted at the end of the period

answer

periodic inventory system

question

inventory updated perpetually, every time inventory is bought, sold, or returned

answer

perpetual inventory system

question

all expenses must be matched in the same accounting period as the revenues they helped to earn doesn't matter when cash is paid, expense and revenue must be recorded under the same accounting period depreciation

answer

matching principle

question

expresses relationship between inventory on hand, purchased, and sold beg invty + purchase - ending invty = cogs

answer

cost of goods sold

question

directly related to running a business to earn profit electricity, etc expenses you need to operate your business

answer

operating expenses

question

first in first out reuse units until they are gone

answer

FIFO

question

last in first out work your way back

answer

LIFO

question

evidence must exist that a transaction produced revenue revenue must have been earned value must be determined at present must be realizable, meaning payment will be received

answer

4 criteria in order to record revenue

question

capitalized- record a cost as an asset expensed- annual cleanings etc

answer

when expenditures should be capitalized or expensed

question

what you bought an item for

answer

historical cost

question

the amount an item depreciates from original cost

answer

depreciation expense

question

all depreciation expenses added up

answer

accumulated depreciation

question

cost value after depreciation

answer

net book value

question

at the end of its life what its worth

answer

residual value

question

the use of life (how long useful)

answer

service life asset

question

when usage is the same each period

answer

straight line

question

when usage varies each period

answer

units of activity

question

when the asset is more efficient in early years but less so over time used to tax

answer

double declining balance

question

*need legal documents trademarks copyrights patents technology licensing rights franchises goodwill

answer

types of intangible assets

question

gross pay - taxes

answer

employee's net pay

question

wages expense (gross pay) on debit taxes payable and cash on credit

answer

employers' wages expense

question

FICA payable + fed and state unemployment

answer

payroll tax expense

question

bond document that each bond hold receives

answer

bond certificates

question

percentage you get back from a specific bond interest payment=1/2(coupon rate)(face value) for the buyers

answer

coupon rate

question

interest expense=(1/2)(market rate)(carrying value) for the business for their books

answer

market yield

question

basic voting stock issued by corporation

answer

common stock

question

when the company sells treasury stock for less or more than what they paid

answer

additional paid in capital

question

cumulative amount of net income earned - cumulative dividends since beginning of corporation

answer

retained earnings

question

company buys back their own stock to resell

answer

treasury stock

question

amount of a company's equity that cannot legally be allowed to leave the business

answer

legal capital

question

establishes minimum amount a stockholder must contribute has no relation to market price

answer

par value

question

total number of shares of stock that are owned by stockholders

answer

outstanding shares

question

A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves

answer

secondary equity markets

question

A=L+SE

answer

balance sheet equation

question

R-E=Net income

answer

income statement equation

question

net sales = sales rev - sales ret allow - sales disc

answer

net sales

question

gross profit = net sales - cogs

answer

gross profit

question

wa = price x units total units

answer

weighted average

question

nr = (total note)(annual interest)(months/days)

answer

notes receivable

question

interest payment = (1/2)(coupon rate)(face value) interest expense = (1/2)(market rate)(carrying value)

answer

bonds

question

straight-line - annual depreciation expense = (historical cost - residual value)/use of life units of production - annual depreciation expense = (historical cost - residual value) x (average used in period)/(average total used) double declining ~straight line rate = (1)/(use of life) ~double declining rate = 2 x straight line rate OR (cost-accumulated depreciation) x (2)/(use of life) = depreciation expense

answer

depreciation

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