Accounting Exam #2 (Chapters 4,5,6,7)

Front 1

Cash Equivalents

Back 1

Short term investments with a maturity date that is less than three months.

Front 2

Bank Reconciliation

Back 2

Matches the balance of cash in the bank account with the balance of cash in the company's own records.

Front 3

Reconciling the Bank Account Steps

Back 3

Adjust the bank's cash, adjust company's cash, and then update the company's cash.

Front 4

Deposits Outstanding

Back 4

Cash receipts of the company that have not been added to the bank's record. (+ to bank)

Front 5

Checks Outstanding

Back 5

Checks the company has written that have not been subtracted from the bank's record of the company's balance. (- to bank)

Front 6

NSF Checks

Back 6

Bad Checks that affects accounts receivable for the company.

Front 7

Petty Cash Fund

Back 7

Pays for minor purchases. At the end of the period it is replenished. (Asset Account)

Front 8

Accounts REceivable

Back 8

The amount of cash owed to a company by its customers from sale of products or services on account.

Front 9

Credit Sales

Back 9

Transferring products and services to a customer today while bearing the risk of collecting payment in the future.

Front 10

Trade Discount

Back 10

Reduction in the listed price of a product or service. The sale is recorded at the discounted price.

Front 11

Sales Return

Back 11

A customer returns a product.

Front 12

Sales Allowance

Back 12

Partial refund of a purchase (Debit Sales Allowance and Credit Accounts Receivable).

Front 13

Contra-Revenue Account

Back 13

(i.e. sales allowance) an account with a balance that is opposite to that of its related revenue accounts.

Front 14

Sales Discount

Back 14

A reduction in the actual amount paid by a customer if they buy within a certain time. (contra-revenue, debit)

Front 15

Net Realizable Value

Back 15

The actual amount of cash a firm expects to collect from customers.

Front 16

Allowance Method

Back 16

Allows for the possibility that some accounts will be noncollectable at some point in the future. (Debit Bad Debt Expense, Credit Allowance for Uncollectible Accounts)

Front 17

Bad Debt Expense

Back 17

The cost of the estimated future bad debts.

Front 18

Allowance for Uncollectible Accounts

Back 18

(Contra Asset)- amount of accounts receivable we expect not to collect.

Front 19

Aging Method

Back 19

The older the account the less likely we are to collect it.

Front 20

Write Off

Back 20

Occurs when an actual bad debt occurs. (DR Allowance of Unc. Accouts, CR Accounts Receivable)

Front 21

Direct Write off

Back 21

Recording bad debt expense at the time we know the account to be uncollectible.

Front 22

Cost Of Goods Sold

Back 22

The cost of the inventory a business sold.

Front 23

Inventory Cost Methods

Back 23

Ways to find the cost of leftover inventory; includes Fifo, Lifo, Specific Identification, Weighted-Average Cost.

Front 24

Fifo Method

Back 24

First units purchased are the first ones sold. When inventory costs are rising it produces highest inventory and gross profit.

Front 25

Lifo

Back 25

The Last units purchased are the first ones sold. When inventory costs are rising it produces lowest inventory and gross profit.

Front 26

Weighted Cost Method

Back 26

Each unit of inventory has a cost equal to the weighted average unit cost.

Front 27

Lower of Cost or Market Method

Back 27

Choose the lower amount between the cost and market value of inventory to find the true ending value of the said inventory.

Front 28

Lifo Reserve

Back 28

difference in the amount of inventory if a company used Fifo instead of Lifo.

Front 29

Replacement Cost

Back 29

The market value of inventory.

Front 30

Capitalize

Back 30

To record an expenditure as an asset.

Front 31

Basket Purchase

Back 31

Buying more than one asset at a time.

Front 32

Depletion

Back 32

Allocation of the cost of a natural resource over its service life.

Front 33

Accumulated Depreciation

Back 33

Contra Asset, you credit this account and debit Depreciation Expense.

Front 34

Residual Value

Back 34

Value received from selling the asset at the end of its service life.

Front 35

Straight Line Depreciation

Back 35

Equal amount depreciated each year, make sure to subtract residual value.

Front 36

Double Declining Balance

Back 36

Depreciation is higher in earlier years than later. (2/service life)

Front 37

Activity Based Depreciation

Back 37

Allocating asset's cost based on its use. Make sure to subtract residual value.