Acct 201 Chpt 4

Front 1

Classified balance sheet

Back 1

Balance sheet that places each asset and liability into a specific category. Categories include current asset, long-term asset, long-term investment, plant asset, intangible asset, current liability, and long-term liability.

Front 2

Liquidity

Back 2

A measure of how quickly an item can be converted to cash. Acids are listed according to liquidity on the classified balance sheet, those with higher liquidity go first.

Front 3

Current asset

Back 3

An asset that is expected to be converted to cash, sold, or used up during the next 12 months or within the businesses normal operating cycle if the cycle is longer than one year.

Front 4

Operating cycle

Back 4

The time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash.

Front 5

Long term asset

Back 5

An asset that will not be converted to cash or used up within the businesses operating cycle or one year, whichever is greater.

Front 6

Long-term investment

Back 6

Investments in bonds, debit Securities, or stocks, Equity Securities, in which the company intends to hold the investment for longer than one year.

Front 7

Plant asset

Back 7

Long lived, tangible asset, such as land, buildings, and equipment, used in the operation of a business.

Front 8

Intangible asset

Back 8

An asset with no physical form that is valuable because of the specific rights it carries. Such as a copyright or a patent.

Front 9

Current liability

Back 9

A liability that must be paid with cash or with goods and services within one year or within the entities operating cycle if the cycle is longer than one year.

Front 10

Long-term liability

Back 10

A liability that does not need to be paid within one year or within the entities operating cycle, whichever is longer.

Front 11

Closing process

Back 11

A step in the accounting cycle that occurs at the end of the period. This process consists of journalizing and posting the closing entries to set the balances of the revenue, expenses, income summary, and dividends accounts to zero for the next period.

Front 12

Temporary account

Back 12

An account that relates to a particular accounting period and is closed at the end of that period, the revenues, expenses, income summary, and dividends accounts are examples.

Front 13

Permanent account

Back 13

An account that is not closed at the end of the end of the period, examples being assets, liabilities, common stock, and retained earnings accounts.

Front 14

Closing entries

Back 14

Entries that transfer the revenues, expenses, and dividends balance to the retained earnings account to prepare the company's books for the next period.

Front 15

Income summary

Back 15

The temporary account into which revenues and expenses are transferred prior to their final transfer into the retained earnings account. Summarizes net income or net loss for the period.

Front 16

Post-closing trial balance

Back 16

A list of the accounts and their balances at the end of the period after journalizing and posting the closing entries. It should include only permanent accounts.

Front 17

Accounting cycle

Back 17

The process by which companies produce their financial statements for a specific period.

Front 18

Current ratio

Back 18

Measures the company's ability to pay current liabilities from current assets. Total current assets divided by total current liabilities.

Front 19

Reversing entry

Back 19

A special journal entry that eases the burden of accounting for transactions in The Next Period. Such entries are the exact opposite of a prior adjusting entry.