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26 Cards in this Set
- Front
- Back
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Closing Entries
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Journal Entries Made at the end of the period for the purpose of closing temporary accounts (revenue, expense, and dividends accounts) and transferring balances to the Retained Earnings Account
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Current Ratio
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Current assets divided by current liabilities
C=A/L Where C=Current Ratio A= Current Assets L=Current Liabilities |
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Financial Statements
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a declaration of information believed to be true and communicated in monetary terms
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Return on Equity
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a measure of net income relative to the company's average stockholder's equity throughout the year.
R=N/E Where R= Return on Equity N= Net Income E= Average Stockholder's Equitiy |
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Liquidity
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The ability of the business to pay it's debts as they come due.
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Profitability
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The Increase in value of the owners' equity
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Current Assets
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Cash and other assets that can be converted into cash or used up within a relatively short period of time without interfering with normal business operations
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Current Liabilities
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Existing obligations that are expected to be satisfied with a company's current assets within a relatively short period of time
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Post Closing Trial Balance
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Consists solely of balance sheet accounts (Assets, Liabilities, and Owners Equity)
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Operating Cycle
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The repeating sequence of transactions by which a business generates its revenue and cash receipts from customers.
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Credit Terms
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"2/10 n/30" read 2, 10, 30. full payment is due in 30 days but the buyer may take a 2% discount if payment is made in 10 days.
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Subsidiary Ledgers
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A ledger containing separate accounts for each of the items making up the balance of a control account in the general ledger. The total of the account balances in a subsidiary ledger are equal to the balance in the general ledger control account.
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Perpetual Inventory System
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A system of accounting for merchandising transactions in which the Inventory and Cost of Goods Sold accounts are kept perpetually Up-To-Date. (Things are updated as they come in) Allows you know know your inventory at any given time.
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Periodic Inventory System
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An Alternative to the Perpetual Inventory System. It eliminates the need for recording the cost of goods sold as sales occur. however, the amounts of inventory and the cost of goods sold are not known until a complete physical inventory is taken at year-end
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Journal Entries
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Entries made into the General Journal
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Physical Count
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A count of your inventory. used to determine the Inventory Shrinkage
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Gross Profit Margin
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Gross Profit expressed as a percentage of net sales. also called gross profit rate.
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Income statement of a merchandising Concern
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Net Sales= Total Sales Revenue- Sales Returns and allowances- Sales Discounts.
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Bank Reconciliation
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An analysis that explains the difference between the balance of cash shown in the bank statement and the balance of cash shown in the depositor's records
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Acct. Recieveable - Income statement approach
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This method focuses on estimating the uncollectible accounts expense to be reported in the income statement for th period, on the basis of past experience, the uncollectible accounts expense is estimated at some percentage of net credit sales. and adjusting entry is made in the full amount of the estimated expense with regard for the current balance in the allowance for doubtful accounts.
Net Sales X % then Debit Uncollectible accounts expense Credit Allowance for Doubtful accounts. |
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Acct Recieveable- Balance sheet approach
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The Difference between the current balance and the required balance is the uncollectible accounts expense matched tot he period.
Debit Uncollectible accounts expense for difference between ew number and old number Credit Allowance for doubtful accounts for the same. |
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Direct Write-off
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no adjusting entries are made until specific receivables are determined worthless.
Debit uncollectible accounts expense Credit accounts receivable |
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Notes Recievable and Interest Revenue
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Accounts Recievable usually do not bear interest. when interest will be charge creditors usually require the debtor to sign a promissory note.
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Interest
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Interest= Principal X Rate of Interest X Time
I=P X R X T Time is 1/12 per month and 1 per year |
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Interest Revenue
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Interest collected is credited to an Interest Revenue Account and the face amount of the note is credited to the Notes receivable account.
When interest is earned Debit Interest Receivable Credit Interest Revenue When making an entry at the end of the period Debit Cash Credit notes receivable, interest receivable, and interest revenue to balance |
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Note Defaults
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Make an entry to move the notes receivable to an accounts receivable.
Debit Accounts Receivable Credit Notes and Interest Receivable, and Interest Revenue |
