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44 Cards in this Set

  • Front
  • Back
funds supplied by creditors
funds provided by owers
probable debts or obligations that result from past transactions, which will be paid with assets or services
interested paid (is/is not) included in the reproted amount of the liability because it _____
is not; accrues
current liabilities
short-term obligations that will be paid iwthin the current operating cycle or one year (whichever is longer)
the ability to pay current obligations
a company has liquidity if __________
it is able to pay its current obligations
Quick Assets / Current Liabilities
Quick Ratio
quick assets
cash, marketable securities, and accounts receivable
Quick Ratio measures...
the level of liquidity
specific operating activities are financed in part by a related___ ___
current liability
delaying payment to suppliers to conserve cash (is/is not) advisable because it ruins positive relationships with suppliers
Cost of Goods Sold / Average Accounts Payable
Accounts Payable Turnover
Accounts payable turnover measures...
how quickly management is paying its trade accounts
Accrued Liabilities
expenses that have been incurred but have not been paid at the end of the accounting period (i.e. property taxes, electricity, salaries)
adjusting entry for vacation time of $125,000
Compensation expense (+E, -SE)..........125,000
Accrued Vacation Liability (+L)............125,000
under the matching concept, the cost of vacation time must be recorded when employees _____ rather than when they ______
perform a service; take a vacation
when vacations are taken...
Accrued vacation liability (-L)
Cash (-A)
federal, state, local income taxes, social security taxes, and federal/state unemployment taxes are...
payroll taxes
Federal Income Tax Withheld
FICA Taxes
Social Security taxes that are imposed equally on the employer and employee
includes all funds earne dby employees as well as funds paid to others on behalf of employees
employee compensation expense
Federal Unemployment Tax Act
Time Value of Money
interest associated with the use of money over time
to the borrower, interest is an _____; to the creditor, it is _____
expense, revenue
Interest =
principal x interest rate x time
to provide accurate info on its current liabilities, a company must reclassify its ______ as a _________ within a year of its maturity date
long-term debt, current liabilitiy
deferred revenues
when a company collects cash before the related revenue has been earned (before providing the service)
contingent liability
potential liability that has arisen as the result of a past event; is not effective until some future event occurs
working capital
the dollar difference between total current assets and total current liabilities
if a business has too little working capital...
it may not meet its obligations to creditors
if a business has too much working capital...
it may have unproductive assets and incur additional costs
long-term liabilities
all the of the tnity's obligations not classified as current liabilities
secured debt
a liability supported by an agreement that if it's not satisified, the creditor can take ownership
private placement
raising long-term debt from a financial service organization
note payable
a written promise to pay a stated sum at one or more specified future dates called MATURITY DATES
publicly traded debt that exceeds the financial ability of any single creditor
operating lease
when an asset is leased on a short-term basis - does not meet criteria established by GAAP and not recorded as a liability
capital lease
leasing of an asset on a long-term basis; meets at least 1 of 4 GAAP criteria; recorded as an asset and liability
4 Criteria for Leases
- lease term is 75% or more of asset's expected economic life
- owernship of asset is transferred to lessee at end of lease term
- lease contract permits lessee to purchase asset at a price lower than its FMV
- present value of lease payments if 90% or more of FMV of asset when lease is signed
managers prefer recording leases as (operating/capital) so they can report less debt on the balance sheet
present value
the current value of an amount otbe received in the future a future amount discounted for compound interest
present value =
1/(1+i)^n x amount
a series of periodic cash receipts or payments that are equal in amount each interest period