Accounting Exam 2

Front 1

Balance Sheet

Back 1

is a listing of an organization's assets and liabilities as of a certain point in time.

Front 2

Equity

Back 2

The difference between assets and liabilities

Front 3

Assets

Back 3

Probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events

Front 4

Liability

Back 4

Probable future sacrifice of economic benefit arising from a present obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.

Front 5

Current asset

Back 5

expected to be used within a year.

Front 6

Current liability

Back 6

expected to be paid or other wise satisfied within a year are current items.

Front 7

Order of Current Assets

Back 7

Cash
Investment securities
Accounts and notes receivable
Inventories
Other Current assets, such as prepaid expenses

Front 8

Order of Non-current Assets

Back 8

Investments
Property, plant, and equipment
Intangible Assets
Other non-current assets, such as deferred income tax assets

Front 9

Order of Current Liabilities

Back 9

Accounts and notes payables
Accrued expenses
Current portion of long-term obligations
Other current liabilities, such as unearned revenues

Front 10

Order of Non-current Liabilities

Back 10

Long-term debt, such as bonds, and mortgages payable
Long-term leases obligations
Deferred income tax liabilities
Other non-current liabilities, such as pension obligations

Front 11

Order of Owners' Equity

Back 11

Contributed capital:
Capital Stock
Additional paid-in capital
Retained Earnings
Other equity, such as treasury stock ( a subtraction)
Accumulated other comprehensive income

Front 12

The most current assets are

Back 12

cash, receivables, and inventories

Front 13

The operating cycle

Back 13

Cash, purchases, inventories, sales, receivables, and collections

Front 14

Trading securities

Back 14

debt and equity securities often called bonds and stocks that are purchased mainly with the intent of reselling the securities in the short term.

Front 15

Cash and receivables

Back 15

reported at their net realizable values

Front 16

Investments in debt and equity securities

Back 16

are reported at their current market value

Front 17

Inventories

Back 17

are reported at cost (LIFO,FIFO)

Front 18

Prepaid expenses

Back 18

reported at their historic costs

Front 19

Deferred income tax assets

Back 19

arise when taxable income exceeds reported income for the period and the difference is expected to reverse in future periods

Front 20

Sinking fund

Back 20

consists of cash ad investment securities that have been accumulated for the stated purpose of repaying a specific loan

Front 21

An existing loan is not classified as a current long as

Back 21

1) the intent of the company is to refinance the loan on a long term basis
2) company;s intent is evidenced by an actual refinancing after the balance sheet date but before the financial statements are finalized or by the existence of an explicit refinancing agreement.

Front 22

Callable obligation

Back 22

is on that is payable on demand and thus has no specific due date.

Front 23

Objective acceleration clauses

Back 23

loan agreement clauses that identify specific deficiencies(example not paying interest payments) that can cause a loan to be immediately callable.

Front 24

Subjective acceleration clause

Back 24

the violations of the condition cannot be objectively determined.

Front 25

Deferred income tax liability

Back 25

income tax expected to be paid in future years on income that has already been reported in the income statement, but which, because of the tax law, has not been taxed

Front 26

Contingent Liabilities

Back 26

Past activities or circumstances may give rise to possible future liabilities although obligations do not exist on the date of the balance sheet.

Front 27

If a future payment is considered probable, the liability should be recorded by a debit to a loss account and a credit to a liability account. T or F

Back 27

True

Front 28

Estimated Liability

Back 28

is a definite obligation with only the amount of the obligation in question and subject to estimation at the balance sheet date.

Front 29

Examples of estimated liabilities are:

Back 29

pensions, warranties, and deferred taxes.

Front 30

Treasury Stock

Back 30

When a company buys back its own shares

Front 31

Liquidity

Back 31

is the ability of a firm to satisfy its short term obligations.

Front 32

Current Ratio

Back 32

a common indicator of the overall liquidity of a company Current Assets/Current Liabilities

Front 33

Quick ratio

Back 33

Cash+Securities+Receivables/Current Liabilities

Front 34

Debt ratio

Back 34

Total Liabilities/Total Assets

Front 35

Asset Turnover

Back 35

Sales/Total Assets

Front 36

ROA

Back 36

NI/Total Assets

Front 37

ROE

Back 37

NI/Stockholders Equity

Front 38

Income

Back 38

is the amount that an entity could return to its investors and still leave the entity as well off at the end of the period as it was at the beginning.

Front 39

Financial capital maintenance

Back 39

assumes that a company has income only if the dollar amount of an enterprise's net assets(A-L) at the end of a period exceeds the dollar amount of net assets at the beginning of the period after excluding the effects of transactions with owners.

Front 40

the amount of income reported to creditors and investors may not be the same as the income reported for tax purposes. T or F

Back 40

True

Front 41

Revenues and gains are generally recognized when

Back 41

1) they are realized or realizable
2) they have been earned through substantial completion of the activities involved in the earnings process.