Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
87 Cards in this Set
- Front
- Back
|
Accounts Payable
|
The amounts that a company owes to its suppliers for previous credit purchases of inventory and supplies
|
|
|
Accounts Receivable
|
the amounts owed to a company by customers from previous credit sales
|
|
|
Bank Reconciliation
|
Prepared by a company to analyze the difference between the ending cash balance in its accounting records and the ending cash balance reported by the bank in the bank statement
|
|
|
Bank Statement
|
a monthly statement from the bank to a company that summarizes the company's banking activities during the month
|
|
|
Cash
|
Includes money on hand, deposits in checking & savings accounts, and checks & credit card invoices that it has received from customers but not yet deposited
|
|
|
Deposit in Transit
|
(Cause of difference in Cash Balance) A cash receipt that the company has added to its Cash account but that the bank has not included in the cash balance reported on the bank statement
|
|
|
Internal Control Structure
|
A set of policies and procedures that directs how employees should perform a company's activities
|
|
|
Inventory
|
The merchandise being held for resale
|
|
|
NSF (not sufficient funds) check
|
(Cause of difference in Cash Balance) This is what the bank records when a customer's check has "bounced" due to not enough money in the customer's check account
|
|
|
Outstanding Check
|
(Cause of difference in Cash Balance) This is a check that the company has written & deducted from its Cash account but that the bank has not deducted from the cash balance reported on the bank statement because the check has not yet "cleared" the bank
|
|
|
Petty Cash Fund
|
A specified amount of money that is under the control of one employee that is used for making small cash payments for the company
|
|
|
Purchase Order
|
A document authorizing a supplier to ship the items listed on the document at a specific price
|
|
|
Specific Identification Method
|
allocates cost to cost of goods sols and to ending inventory bu assigning to each unit sold and to each unit ending inventory the cost to the company of purchasing that particular unit
|
|
|
Working Capital
|
The excess of a company's current assets over its current liabilities
(Current assets - current liabilities) This term is also the net resources that managers have to work with in the company's day to day operations |
|
|
Simple cash controls (2)
|
1.Cash Receipts- internal company control procedures for recording receipts
2. Cash Payments- basic rule is to make all payments by check |
|
|
The differences between the ending cash balance on the bank statement & on the company's records (5)
|
1. Deposits in transit
2. Outstanding Checks 3. Deposits made directly by the bank 4. Charges made directly by the bank 5. Errors |
|
|
Accrual Accounting
|
a company records its revenue and related expense transactions in the same accounting period that it provides goods & services, regardless of whether it recieves or pays cash in that period
|
|
|
Cash Flow Returns
|
computed in order to study a company's ability to generate enough cash to remain in business & earn a satisfactory profit. computed: (cash flow)/(dollar amount of its assets or owner's equity)
|
|
|
cash flow statement
|
shows the inflows (receipts) and outflows (payments) of cash during an accounting period, explaining how its beginning cash balance changed to its ending cash balance because of transactions that resulted in increases and decreases in cash
|
|
|
direct method
|
a company using this method subtracts the operating cash outflows from the operating cash inflows to determine the net cash provided by (or used in) operating activities
|
|
|
financing activities
|
includes obtaining capital from the owner & providing the owner with a return on the investment, as well as obtaining capital from creditors & repaying the amounts borrowed
|
|
|
indirect method
|
when a company adjusts its net income to compute the net cash flow from operating activities
|
|
|
investing activities
|
includes lending money & collecting onloans, investing in other companies, & buying & selling property & equipment
|
|
|
operating activities
|
includes the primary activities of buying, selling, & delivering goods for sale, as well as providing services. Also includes the activities that support the primary activities, such as administrative activities
|
|
|
operating cycle
|
the average time required to pay for inventory, sell the inventory for cash or on credit (increasing accounts payable)
|
|
|
Operating Cash Flow Margin Equation
|
(net cash flow provided by Operating Activities)/(net sales)
|
|
|
Cash Return on Total Assets Equation
|
(Net Cash Flow provided by operating activities + interest paid) / (average total assets)
|
|
|
Cash Return on Owner's Equity Equation
|
(Net Cash Flow Provided by Operating Activities) / (Average Owner's Equity)
|
|
|
Conservation principle
|
Holds that a company should apply GAAP in such a way that there is little chance that it will overstate assets or income
|
|
|
Cost of goods sold
|
a company reports this in the period in which it sells the item & reports the revenue from the sale
|
|
|
FIFO
|
when a company uses this cost flow assumption, it includes the earliest (first) costs it incurred in the cost of goods sold as it sells its products, leaving the latest costs in ending inventory
|
|
|
Fob destination
|
means that the selling company transfers ownership to the buyer at the place of delivery (after transit is completed)
|
|
|
FOB shipping point
|
means that the selling company transfers ownership to the buyer at the place of sale (shipping point)
|
|
|
Gross profit method
|
Used to estimate the cost of ending inventory by multiplying the net sales by the historic gross profit percentage & subtracting this amount from net sales to determine the estimated cost of goods sold, and then subtracting this amount from the cost of goods available for sale
|
|
|
Holding gain/inventory profit
|
the artificial profit that results when a company records cost of goods sold at an historical cost that is lower than the replacement cost of the units sold
|
|
|
In transit
|
Means that a freight company is in process of delivering the inventory from the selling company to the buying company
|
|
|
Inventory
|
a company uses this to describe its assets that are 1) ready for sale, 2) being produced for sale, 3) ready for use in a production process
|
|
|
LIFO
|
a cost flow assumption that includes the latest (last) costs it incurred before a sale in its cost of goods sold and the earliest costs (part of all of which are costs it incurred in previous periods) in ending inventory
|
|
|
LIFO liquidation
|
Occurs when a company reduces the physical quantity of inventory from the beginning of the year to the end of the year
|
|
|
LIFO liquidation profit
|
Extra profit that results from reporting a lower cost of goods sold than would have been reported if a LIFO liquidation han not occured
|
|
|
LIFO reserve
|
Difference between LIFO & non-LIFO ending inventory amounts
|
|
|
Lower-of-cost-or-market (LCM) method
|
When the market value of a company's inventory falls below its cost, the company is required to reduce, or "write down," the inventory to that market value
|
|
|
Moving average
|
When a company uses the average cost flow assumption under the perpetual inventory system, it must compute an average cost per unit after each purchase and then assign this new average cost to items sold until the next purchase
|
|
|
Non-LIFO
|
Cost of ending inventories under an alternative to the LIFO cost flow assumption, such as FIFO, average, current, or replacement cost
|
|
|
Periodic inventory system
|
company uses this when it does not need to keep continuous record of the inventory sold on hand. instead it determines the inventory on hand by a physical count and the end of the period
|
|
|
Perpetual inventory system
|
company uses this to keep a continuous record of the cost of inventory on hand and the cost of inventory sold
|
|
|
Replacement cost
|
the cost (including any transportation costs ordinarily incurred) that a company would have to pay at the balance sheet date to purchase (replace) an item of inventory (based on purchasing inventory in normal quantities form the usual suppliers
|
|
|
Retail inventory method
|
Used to estimate the cost of ending inventory by multiplying the retail value of the ending inventory by the cost-to-retail ration of the current period
|
|
|
Specific identification method
|
Company assigns a specific cost (what it paid for that specific unit) to each unit of inventory it sells & to each unit that it holds in its ending inventory
|
|
|
Accelerated depreciation methods
|
Records the highest depreciation in the first year of an asset's service life and lower depreciation in subsequent years
|
|
|
Accumulated depreciation
|
Total amount of depreciation expense recorded over the life of an asset to date
|
|
|
Amortization
|
Used for intangible assets
|
|
|
Amortization expense
|
Portion of the acquisition cost of an intangible asset that a company allocates as an expense to each accounting period over the asset's service life
|
|
|
Book value
|
ASset's original cost minues the related accumulated depreciation
|
|
|
Capital expenditure
|
Cost that increases the benefits a company will obtain from an asset
|
|
|
Copyright
|
Exclusive right granted by the US gov. to publish or sell literary or artistic products for the life of the author plus an additional 70 years
|
|
|
Depreciable cost
|
Cost of a physical asset less its residual value
|
|
|
Depreciation
|
Used for PP&E
|
|
|
Depreciation expense
|
Part of the cost of PP&E (physical asset) that a company allocates as an expense to each accounting period in which the company uses the asset
|
|
|
Depletion
|
Used for Natural Resource assets
|
|
|
Depletion expense
|
Portion of the cost (less estimated residual value) of a natural resource asset that a company allocates as an expense to each accounting period over the asset's service life
|
|
|
Development
|
Translation of research into a plan or design for a new or improved product or process
|
|
|
Double-declining-balance method
|
Computes depreciation expense by multiplying the book value of an asset at the beginning of the period by twice the straight line rate
|
|
|
Estimated residual value
|
cash a company estimates it will receive from the sale or disposal of an asset at the end of its estimated service life
|
|
|
Estimated service life
|
life over which a company expects an asset to be usefule
|
|
|
Franchise
|
Agreement entered into by 2 parties where, for a fee, one party gives the other party rights to perform certain functions or sell certain products or services over the legal life of the franchise
|
|
|
Functional causes of Depreciation
|
Limit the life of the asset, even though the physical life is not exhausted
|
|
|
Goodwill
|
Difference between the total price a company paid to buy another company and the market value of the identifiable net asset it acquired
|
|
|
Impaired
|
An asset is this when the expected future net operating cash flows are less than the book value of the asset
|
|
|
Intangible assets
|
Company's long-term assets that do not have a physical substance
|
|
|
Maintenance & customer-support costs
|
Computer software costs that a company incurs after it releases the software
|
|
|
Modified accelerated cost recovery system (MACRS)
|
Accelerated depreciation method acceptable under the internal revenue code and used by companies for income tax purposes
|
|
|
Natural resource asset
|
assets that are used up as they are extracted, mined, dug up, or chopped down
|
|
|
Net asset value
|
cost of an asset less its accumulated depreciation
|
|
|
Operating capability
|
company's ability to continue a given level of operations
|
|
|
Operating expenditure
|
cost that only maintains the benefits that a company originally expected from an asset
|
|
|
Patent
|
exclusive right granted by the US gov. giving the owner of an invention the control of its manufacture or sale for 20 years from the date of the patent application
|
|
|
Physical causes of depreciation
|
include wear & tear due to use, deterioration and decay caused by the passage of time, and damage and destruction
|
|
|
Property, plant, & equipment
|
All of the physical (tangible), long term assets a company uses in its operations
|
|
|
Rational
|
Means that the amount of the depreciation relates to the benefits that the asset produces in any period
|
|
|
Software production costs
|
Cost of designing, coding, testing, & preparing documentation & training materials
|
|
|
Straight-line method
|
Computes depreciation expense by allocating the cost of an asset, less its estimated residual value, equally to each period of the asset's estimated service life
|
|
|
Sum of the years digits method systematic
|
Computes depreciation expense by multiplying the depreciable cost of an asset by a fraction that declines each year
|
|
|
Trademark or tradename
|
Exclusive right granted by the US Gov (or the government of another country) to use a name or symbol for product identification
|
|
|
Unit cost
|
Computer software cost of producing software, such as costs of the disks & the duplication of the software, packaging, documentation, & training materials
|
|
|
Units-of-production method
|
Used to compute depletion (or depreciation) based on the level of an asset's physical activity
|
|
|
research
|
Aimed at the discovery of ne knowledge & intended for use in developing a new or improved product or process
|
