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47 Cards in this Set

  • Front
  • Back
Financial Assets
Cash & Cash Equivalents
Accts Recievable
Marketable Securities
Marketable Securities
Bonds & Stocks
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
- 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
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
LIFO means
Last In, First Out
FIFO means
First in, First Out
4 Methods
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
-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
Cost Of Goods Sold
(Most Recently Acquired Goods)
Oldest Costs --> COGS

Recent Costs --> Ending
Ending Inventory
Goods that have been around
Average Inventory falls
in between LIFO and FIFO
Recent Costs --> COGS

Oldest/ Lowest Costs -->
Ending Inventory
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)
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
Lower of Cost or Market

M- Market Value
Market Value =
Current Replacement Cost