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22 Cards in this Set
- Front
- Back
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What is the fundamental accounting equation?
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Assets=liabilities+owners equity
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What are the two components of stockholders equity?
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common stock & retained earnings
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What is the formula for current ratio?
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total current assets/total current liabilities
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what does the current ratio imply
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whether a company has assets to cover near-term liabilities
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what is the formula for the quick ratio?
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cash+short term investments+netcurrent receivables/ total current liabilities
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what does the quick ratio imply?
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helps imply whether short term debt can be covered
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what is the formula for working capital?
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total current assets-total current liabilities
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what does the working capital ratio imply?
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it shows how man extra resources a company has available
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what is the formula for the debt ratio?
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total liabilities/total assets
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what does the debt ratio imply?
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it is a simple measure of the long-term capability of a firm. lower ratio is better.
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What is the group that presently creates accounting standards?
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Financial accounting standards board - FASB
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What gives the board of directors the right to change a companies CEO?
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stockholder's elect a board of directors and give the board the right to hire and fire executives
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What are the three things you need to recognize revenue according to the revenue recognition concept?
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1.)implied or explicit agreement; known price; substantial effort to complete transaction
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what is the purpose of adjusting entries?
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to assign revenues and expenses to their correct period. (there is no trigger event) classified as whether they preced or follow the flow of cash.
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what is an accrual and a deferral?
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accrual=revenue or expense that precedes the flow of cash
deferall= revenue or expense that follows the flow of cash |
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what is the revenue concept?
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describes when and how much to record in the accounting system. (implied or explicit agreement)
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what is the matching concept?
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expenses should be recorded in the same period that any revenues associated with those expenses are recorded.
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when do you recognize expenses and revenues during cash accounting?
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when there is an exchange of cash
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whe do you recognize expenses and revenues during accrual accounting?
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when expenses and revenues are earned
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When can you use reversing entries?
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When in the course of the adjusting process, you increase an asset or liability account
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Where do we close dividends to?
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retained earnings
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What is double taxation?
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occurs only in corporations. a corporation must pay tax on it's net income. when they pay dividends to shareholders, the shareholders must also be taxed on income from dividends. so same money has been taxed twice
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