Acctg Exam 1

Front 1

(Liquidity) Working Capital

Back 1

Current assets-Current liabilities

Front 2

(Liquidity) Current ratio

Back 2

Current assets/current liabilities

Front 3

(Solvency) Debt to total assets ratio

Back 3

Total liabilities/total assets

Front 4

(Solvency) Free cash flow

Back 4

Cash provided by operations-capital expenditures-cash dividends

Front 5

Stockholders Equity

Back 5

2 parts: common stock and retained earnings

Front 6

Solvency

Back 6

Companies ability to survive over a long period of time

Front 7

Time period assumption

Back 7

the life of a business can be divided into artificial time periods

Front 8

Monetary unit assumption

Back 8

only things that can be expressed in monetary terms are included in the accounting records

Front 9

Economic entity assumption

Back 9

Every economic entity should be separately identified and accounted for

Front 10

The going concern assumption

Back 10

the business will remain in operation for the foreseeable future

Front 11

Cost principle

Back 11

Assets are recorded at their cost

Front 12

Normal balance

Back 12

The balance expected to be in an account. The normal balance is found on the side that increases a particular account

Front 13

General ledger

Back 13

Contains all the assets, liabilities, and stockholders equity

Front 14

journal

Back 14

Where a transaction is initially recorded before it is transferred to the accounts

3 significant contributions:
1. It discloses in one place the complete effect of a transaction
2. It provides a chronological record of transactions
3. It helps prevent or locate errors because the debit and credit amounts for each entry can be readily compared

Front 15

Ledger

Back 15

The entire group of accounts maintained by a company

Front 16

Trial balance

Back 16

List of accounts and their balances at a given time. $ amount of debits must equal credits, a trial balance must prove the equality of debits and credits in the ledger

Front 17

Revenue recognition principle

Back 17

Revenue is to be recognized in the accounting period in which it is earned

Front 18

Matching Principle

Back 18

Expenses must be matched with revenues
The critical issue: determining when the expense makes its contribution to revenue

Front 19

Accrual basis accounting

Back 19

transactions that change a company's financial statements are recorded in the periods of which the events occur, even if cash is not exchanged

Front 20

Cash basis accounting

Back 20

Revenue is recorded only when cash is received, expense is recorded only when cash is paid

Front 21

Deferrals (prepaid expenses)

Back 21

Prepaid expenses: expenses paid in cash and recorded as assets before they are used

Unearned revenues: Cash received and recorded as liabilities before revenue is earned

Front 22

Accruals

Back 22

Accrued revenues: revenues earned but not yet received in cash or recorded

Accrued expenses: expenses incurred but not yet paid in cash or recorded

Front 23

Accounting Cycle

Back 23

1. Analyze business transactions
2. Journalize the transactions
3. Post to ledger accounts
4. Prepare a trial balance
5. Journalize and post adjusting entries
6. Prepare an adjusted trial balance
7. Prepare financial statements
8. Journalize and post closing entries
9. Prepare a post-closing trial balance

Front 24

Financing activities

Back 24

The way a business raises funds for operations.
1. Borrowing $
2. Selling shares of stock

Front 25

Investing activities

Back 25

Deals with what a corporation does with the financing it receives.
1. Purchasing Assets

Front 26

Operating activities

Back 26

Operations of the business
1. Revenues
2. Expenses

Front 27

Income statement

Back 27

Success or failure of the company's operations during the period.
Only revenues and expenses appear on the income statement

Front 28

Statement of retained earnings

Back 28

Amounts and causes of changes in the R/E balance during the period.

Front 29

Balance Sheet

Back 29

Reports assets and claims (liabilities and stockholders equity) to those assets at a specific point in time.
Balance sheet is an expanded expression of the basic accounting equation (A=L+S/E)

Front 30

Statement of cash flows

Back 30

Provides financial information about the cash receipts and payments for a specific period of time.
Here a user will find info about the financing, investing, and operating activities of a business

Front 31

Classified Balance sheet

Back 31

Assets:
1. Current assets
2. Long term assets
3. Property, plant, and equipment
4. Intangible assets
Liabilities:
1. Current
2. Long term
Stockholders equity
1. Common stock
2. Retained earnings