Ch 2-3

Front 1

capital stock

Back 1

the portion of a corporations stockholders equity contributed by investors (owners) in exchange for share of stock

Front 2

financial accounting system

Back 2

a system that includes a set of rules for determining what, when, and the amount that should be recorded for an economic event, a framework for preparing financial statements, and one or more controls to determine whether errors could have occurred in the recording process

Front 3

liquidity

Back 3

the ability to convert an asset to cash

Front 4

transaction

Back 4

an economic event that under generally accepted accounting principles (GAAP) affects elements of the accounting equation and must be recorded

Front 5

account

Back 5

a record in which increases and decreases in a financial statement element are recorded

Front 6

accounting cycle

Back 6

the process that begins with the analyzing transactions and ends with preparing the financial statements

Front 7

accounts payable

Back 7

liabilities for amounts incurred from purchases of products or services in the normal operations of a business

Front 8

accounts receivable

Back 8

receivables created by selling merchandise or services on credit

Front 9

accrual basis of accounting

Back 9

a system of accounting in which revenue is recorded as it is earned and expenses are recorded and matched against the revenue they generate

Front 10

accruals

Back 10

recognition of revenue when earned of expenses when incurred regardless of when cash is received or disbursed

Front 11

accrued assets

Back 11

revenues that have been earned at the end of an accounting period but have not been recorded in the accounts; sometimes called accrued revenues

Front 12

accrued expenses

Back 12

expenses that have been incurred at the end of an accounting period but have not been recorded in the accounts; some times called accrued liabilities

Front 13

accumulated depreciation

Back 13

an offsetting or contra asset account used to record depreciation on a fixed asset

Front 14

adjustment processing

Back 14

a process required by the accrual bases of accounting in which the accounts are updated prior to preparing financial statements

Front 15

book value

Back 15

the cost of a fixed asset minus accumulated depreciation on the asset

Front 16

cash basis of accounting

Back 16

a system of accounting on which only transactions involving increases or decreases of the entity's cash are recorded

Front 17

classified balance sheet

Back 17

a balance sheet prepared with various sections, subsections, and captions that aid in its interpretation and analysis

Front 18

current assets

Back 18

cash and other assets that are expected to be converted to cash or sold or used up through the normal operations of the business within a year or less

Front 19

current liabilities

Back 19

liabilities that will be due within a short time (usually a year or less) and that are to be paid out of currents assets

Front 20

deferrals

Back 20

delayed recordings of expenses or revenues

Front 21

deferred expenses

Back 21

items that are initially recorded as assets but are expected to become expense over time or through the normal operations of the business; sometimes called prepaid expenses

Front 22

deferred revenues

Back 22

items that are initially recorded as liabilities but are expected to become revenues over time or through the normal operations or the business; sometimes called unearned revenues

Front 23

depreciation

Back 23

the systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life

Front 24

fixed assets

Back 24

long-lived or relatively permanent tangible assets that are used in the normal business operation; plant assets

Front 25

long term liabilities

Back 25

liabilities that will not be due for a long time > year

Front 26

notes receivable

Back 26

written claim against debtors who promise to pay the amount of the note plus interest at an agreed upon rate