Chpt 2

Front 1

Classified Balance Sheet

Back 1

A balance sheet that groups together similar assets and similarliabilities, using a number of standard classifications and sections.

Front 2

Comparability

Back 2

Ability to compare the accounting information of different companiesbecause they use the same accounting principles

Front 3

Consistency

Back 3

Use of the same accounting principles and methods from year to yearwithin a company.

Front 4

Cost Constraint

Back 4

Constraint that weighs the cost that companies will incur to provide theinformation against the benefit that financial statement users will gain fromhaving the information available.

Front 5

Current Assets

Back 5

Assets that companies expect to convert to cash or use up within oneyear or the operating cycle, whichever is longer.

Front 6

Current Liabilities

Back 6

Obligations that a company expects to pay within the next year oroperating cycle, whichever is longer.

Front 7

Current Ratio

Back 7

A measure of liquidity computed as current assets divided by currentliabilities.

Front 8

Debt to assets ratio

Back 8

A measure of solvency calculated as total liabilities divided by totalassets. It measures the percentage of total financing provided by creditors

Front 9

Earnings per share

Back 9

A measure of the net income earned on each share of common stock;computed as net income minus preferred dividends divided by the average numberof common shares outstanding during the year.

Front 10

Economic Entity Assumption

Back 10

An assumption that every economic entity can be separately identifiedand accounted for.

Front 11

Fair value principle

Back 11

Assets and liabilities should be reported at fair value (the pricereceived to sell an asset or settle a liability).

Front 12

Faithful Representation

Back 12

Information that is complete, neutral, and free from error.

Front 13

Financial Accounting Standards Board (FASB)

Back 13

The primary accounting standard-setting body in the United States.

Front 14

Free Cash Flow

Back 14

Net cash provided by operating activities after adjusting for capitalexpenditures and cash dividends paid.

Front 15

Full disclosure Principle

Back 15

Accounting principle that dictates that companies disclose circumstancesand events that make a difference to financial statement users

Front 16

Generally accepted accounting principles

Back 16

A set of accounting standards that have substantial authoritativesupport, that guide accounting professionals.

Front 17

Going Concern Assumption

Back 17

The assumption that the company will continue in operation for theforeseeable future.

Front 18

Historic Cost Principle

Back 18

An accounting principle that states that companies should record assetsat their cost.

Front 19

Intangible Assets

Back 19

Assets that do not have physical substance

Front 20

International Accounting Standards Board

Back 20

An accounting standard-setting body that issues standards adopted bymany countries outside of the United States

Front 21

International Financing Reporting Standards

Back 21

Accounting standards, issued by the IASB, that have been adopted by manycountries outside of the United State

Front 22

Liquidity

Back 22

The ability of a company to pay obligations that are expected to becomedue within the next year or operating cycle.

Front 23

Liquidity Ratios

Back 23

Measures of the short-term ability of the company to pay its maturingobligations and to meet unexpected needs for cash

Front 24

Long term Investments

Back 24

Generally, (1) investments in stocks and bonds of other corporationsthat companies hold for more than one year; (2) long-term assets, such as landand buildings, not currently being used in the company's operations; and (3) long-termnotes receivable

Front 25

Long Term Liabilities

Back 25

Obligations that a company expects to pay after one year.

Front 26

Materiality

Back 26

Whether an item is large enough to likely influence the decision of aninvestor or creditor

Front 27

Monetary Unit Assumption

Back 27

An assumption that requires that only those things that can be expressedin money are included in the accounting records

Front 28

Operating Cycle

Back 28

The average time required to purchase inventory, sell it on account, andthen collect cash from customers—that is, go from cash to cash.

Front 29

Periodicity Assumption

Back 29

An assumption that the life of a business can be divided into artificialtime periods and that useful reports covering those periods can be prepared forthe business

Front 30

Profitability Ratio

Back 30

Measures of the operating success of a company for a given period oftime.

Front 31

Property, plant, and equipment

Back 31

Assets with relatively long useful lives that are currently used inoperating the business.

Front 32

Public Company Accounting Oversight Board

Back 32

The group charged with determining auditing standards and reviewing theperformance of auditing firms.

Front 33

Ratio

Back 33

An expression of the mathematical relationship between one quantity andanother.

Front 34

Ratio Analysis

Back 34

A technique that expresses the relationship among selected items offinancial statement data.

Front 35

Relevance

Back 35

The quality of information that indicates the information makes adifference in a decision.

Front 36

Securities and Exchange Commision

Back 36

The agency of the U.S. government that oversees U.S. financial marketsand accounting standard-setting bodies.

Front 37

Solvency

Back 37

The ability of a company to pay interest as it comes due and to repaythe balance of debt due at its maturity.

Front 38

Solvency ratio

Back 38

Measures of the ability of the company to survive over a long period oftime

Front 39

Statement of Stockholders Equity

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A financial statement that presents the causes of changes tostockholders' equity during the period, including those that caused retainedearnings to change.

Front 40

Timely

Back 40

Information that is available to decision-makers before it loses itscapacity to influence decisions.

Front 41

Understandability

Back 41

Information presented in a clear and concise fashion so that users caninterpret it and comprehend its meaning.

Front 42

Verifiable

Back 42

The quality of information that occurs when independent observers, usingthe same methods, obtain similar results.

Front 43

Working Capital

Back 43

The difference between the amounts of current assets and currentliabilities.