Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
47 Cards in this Set
- Front
- Back
|
Financial Assets
|
Cash & Cash Equivalents
Accts Recievable Marketable Securities |
|
|
Marketable Securities
|
Bonds & Stocks
|
|
|
Cash
|
Stable Value
Short Term Highly Liquid - not an investment |
|
|
Cash Equivalents
|
Money Market Funds
T-bills (90 days or less) Commercial Paper |
|
|
Cash & Cash Equivalents Valued on BS
|
High/Historical Cost & Face Value
|
|
|
Marketable Securities valued on BS
|
Current Market Value
|
|
|
Marketable Securities current market value
|
-acctg logic of FASB fluctuate in value
- violation of Historical Cost Principle |
|
|
Accts. Recievable value on BS
|
Net Realizable Value
|
|
|
Net Realizable Value
|
(what do I expect to collect?)
- Direct Write off Method - Balance Sheet Method - Income Statement Method |
|
|
Unrealized Gain/Loss
|
-included in stockholder's equity section of balance sheet
*ONLY for marketable securities (ex: $20 gain in stock can't be reported yet because it is an unrealized paper gain) |
|
|
3 methods for Accts Recievable
|
Direct Write Off Method
Balance Sheet Method Income Statement Method |
|
|
Direct Write Off
|
*can only use if losses are MINIMAL
- When company knows a customer is not going to pay & files lawsuit - made when all processes have been exhausted and court agrees |
|
|
Balance Sheet Method
|
-OK and PREFERRED by FASB
- Uses Aging of Accts Reciev. - Focuses on recorded balance of AR |
|
|
The longer the recievable is outstanding
|
the less likely it is that the company will collect
|
|
|
Balance Sheet & Income Statement Methods
|
Take into account Matching Principle
|
|
|
Income Statement Method
|
- Income Statement and Credit Sales
- OK by FASB - % of credit sales (history) uncollectable |
|
|
Internal Controls for Cash
|
Always separate the handling of cash and the accounting for cash
- prevents fraud - ex: DuPont guy |
|
|
Intrest
|
Arabs think it's immoral to charge people for the use of money
|
|
|
Timed Value of Money
|
- you can invest or spend $
- $ in your hands today rather than future |
|
|
Intrest Rate Equation
|
I = Price x Rate + Time
(Principle) |
|
|
LIFO means
|
Last In, First Out
|
|
|
FIFO means
|
First in, First Out
|
|
|
4 Methods
|
LIFO
FIFO Specific Goods Average Cost |
|
|
Average Cost of
|
every item in inventory
|
|
|
LIFO has
|
Highest COGS
& Lowest net income |
|
|
LIFO helps
|
conserve cash
|
|
|
FIFO has
|
Lowest COGS
& Highest net income |
|
|
Accounting Methodology
|
pressure to keep prices up
|
|
|
IRS
|
-you can use LIFO & pay less taxes, but you have to tell your stockholders
- you can't use FIFO and say you're using LIFO |
|
|
COGS
|
Cost Of Goods Sold
(Most Recently Acquired Goods) |
|
|
FIFO
|
Oldest Costs --> COGS
Recent Costs --> Ending Inventory |
|
|
Ending Inventory
|
Goods that have been around
|
|
|
Average Inventory falls
|
in between LIFO and FIFO
|
|
|
LIFO
|
Recent Costs --> COGS
Oldest/ Lowest Costs --> Ending Inventory |
|
|
JIT
|
Just In Time Inventory Systems
- cut down inventory time value - applied to most manufacturers in US - Reduce dollar value of inventory that you have to carry - Improve return on investment & efficiency (ex: Boeing, Crystler) |
|
|
Lower of Cost or Market Rule
|
Company values its inventory in the balance sheet at the lower of its cost or market value
|
|
|
Current Market (Value)
|
Current Replacement Cost (what it costs to go buy next item)
|
|
|
FOB
|
Free On Board
-Shipping Point or Destination - Designate when titles are passed & who is held responsible for inventory (ex: natural disasters, fires) (ex: In transit seller held resposible cuz title hasn't transferred yet) |
|
|
Gross Profit Method
|
-used often
- use growth profit rate for current or historical period |
|
|
Gross Prof. Method and Retail Method
|
*Use instead of physical Inventory
*ESTIMATING techniques for inventory |
|
|
Retail Method
|
uses retail prices to develop cost ratio
* Relationship between current retail prices & current costs |
|
|
Specific Identification
|
Merchant knows EXACT cost of items
|
|
|
LIFO facts
|
- get diff. answers
- Started from inflation in 70s - Most companies use it |
|
|
Total Cost of Purchased Inventory Equation
|
COGS + Ending Inventory =
Total Cost of Purchased Inventory |
|
|
LIFO,FIFO & Average Cost
|
Apply to both periodic and perpetual methods
|
|
|
L/CM
|
Lower of Cost or Market
M- Market Value |
|
|
Market Value =
|
Current Replacement Cost
|
