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27 Cards in this Set

  • Front
  • Back
Relevant Information
Can influence a decision; it is timely and has predictive and/or feedback value
Reliable Information
Accurate, unbiased, and verifiable
Consistent Information
can be compared over time because similar accounting methods have been applied
Comparable Information
allows comparisons accross businesses because similar accounting methods have been applied
Cost-Benefit Constraint
Suggest that the benefits of accounting for and reporting information should outweigh the costs
Tangible Assets
Physical assets such as property plant and equipment
Intangible Assets
Non-physical assets such as trademarks patents or copyrights
Par Value
is the legal amount per shard established by the board of directors; minimum amount a stockholder must contribute; no relationship to market value of stock
Paid-in Capital
the amount of contributed capital less the par value of the stock
Accumulated other comprehensive income
include the net unrealized gains or losses on securities, net minimum pension liability adjustment, and net foregin currency translation adjustment, which are directly credited or debited to the stockholders' equity account
Nonrecurring Items
Reported in Income statements:
1. Discontinued operations
2. Extraordinary items
3. Cumulative effect of changes in accounting methods
Cash Flows from Operating Activites
reports cash flows associated with earning income
Cash Flows from Investing Activities
Cash flows in this section are associated with purchase and sale of:
1. Productive Assets
2. Investment in other companies
Cash Flows from Financing Activities
related to finanacing the business through debt issuances and repayments, stock issuances and repurchases and dividend payments
Net Profit Margin
Net Income/Net Sales:
measures how much of every sales dollar is profit
Asset turnover (efficiency)
Net Sales/Average Total Assets
measures how many sales dollars the company generates with each dollar of assets
Financial Leverage
Average Total Assets/Average Stockholders' Equity:
measures how many dollars of assets are employed for each dollar of stockholder investment
Increase by:
1. Increased borrowing
2. Repurchasing outstanding stock
Market Efficiency
A quick, unbiased reaction to financial information; reaction to an analyst report or recommendation
5 reasons to accept credit cards
1. Increase customer traffic
2. Avoiding the cost of providing credit driect to customers (bad debts, record keeping)
3. Lowering losses due to bad checks
4. Avoiding losses from fraudulent credit card sales
5. Faster receipt of its money
2/10, n/30
2 = discount percentage
10 = # of days in discount period
n = Net (total sales minus returns)
30 = maximum credit period
Allowance Method
bases bad debt expense on an estimate of uncollectible accounts - 2 steps:
1. making adjusting entry to record estimated bad debts
2. writing off accounts to be uncollectable
Percentage of credit sales method (debt estimation)
bases bad debt expense on the historical percentage of credit sales that result in bad debts
Aging of Accounts Receivable Method (debt estimation)
estimates uncollectible accounts based on the age of each account receivable
Bank Reconciliation
the process of cerifying the accuracy of both the bank statement and the cash accounts of a business
Cost of Goods Sold Equation
Beg. Inventory + purchases - ending inventory = COGS
Used by most companies to make them lok good: maximizes net income and assets
Used to end up paying less taxes