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29 Cards in this Set

  • Front
  • Back
Types of Adjusting Entries
1. Unearned Revenue
2. Prepaid Expense
3. Accrued Expense
4. Accrued Revenue
5. Depreciation
Steps of Closing Process
1. Close revenue accounts
2. Close expenses accounts
3. Close income summary account
4. Close owner withdrawals.
Year-End Worksheet
1. Enter Trial Balance
2. Enter adjustments
3. Prepare Adjusted Trial Balance
4. Sort Adjusted Trial Balance to financial statement columns (Revenue and Expense accounts to Income Statement; Balance Sheet accounts to Balance Sheet and Statement of Owner's Equity columns)
5.) Total Statement Columns to computer Income Statement and Balance Sheet totals
Steps to Accounting Process (Order of entries)
1.) Journal Entries
2.) General Journal
3.) General Ledger
4.) Trial Balance
5.) Adjustments
6.) Adjusted Trial Balance
7.) Prepare Financial Statements (Income Summary, Balance Sheet, Statement of Owner's Equity, Cash Flow)
Permanent Accounts
Temporary Accounts
Income Summary
Owner Withdrawals
Define: Operating Cycle
Time span from when cash is used to acquire goods and services until cash is received from the sale of goods or services.
Current Assets
Short Term Investments
Accounts Receivable
Noncurrent Assets
Long Term Assets
Plant Assets
Intangible Assets
Current Ratio
Current Asset
Current Liabilities

Ability to pay company's short-term obligations (should be >1)
Net Income (Merchandising)
Net Sales
- Cost of Goods Sold
Gross Profit
- Operation Expenses
Net Income
Merchandise Inventory
Asset; includes cost incurred to buy the goods, ship to store and make them ready for sale.
Perpetual Inventory System
Continually updates accounting records for inventory.
Periodic Inventory System
Updates accounting records for inventory ONLY at the end of a period.
Journal Entry: Purchase of Inventory
Dr Merchandise Inventory
Cr Accounts Payable or Cash
Journal Entry: Sell Inventory to Customer
Dr Accounts Receivable
Cr Revenue
Dr Cost of Goods Sold
Cr Inventory
Journal Entry: Return product we purchased on credit
Dr Accounts Payable
Cr Inventory
Journal Entry: Received returned inventory (non-defective) from customer
Dr Sales Returns
Cr Accounts Receivable
Dr Inventory
Cr Cost of Goods Sold
Journal Entry: Record Purchase Discount
Dr Accounts Payable
Cr Cash
Cr Inventory
Journal Entry: Record sales discount
Dr Cash
Dr Sales Discount
Cr Accounts Receivable
Journal Entry: Record Shipping Charges
FOB: Shipping Point (Buyer pays)
Dr Inventory
Cr Cash

FOB: Destination (Seller pays)
Dr Shipping Expense
Cr Cash
Acid Test Ratio
"Quick Ratio"
Ability of merchandisers to pay liabilities

Cash + Short Term Investments + Receivables
Current Liabilities
Gross Margin Ratio
The amount that remains after COGS to pay operating expenses.

Net Sales - COGS
Net Sales
Closing Entires (Specific to Merchandising)
Dr Sales
Cr Income Summary

Dr Income Summary
Cr Sales Discounts
Cr Sales Returns & Allowances
Cr Cost of Goods Sold
Journal Entry: Adjusting Inventory
Dr Cost of Goods Sold
Cr Inventory
Goods in Transit
Recorded in inventory based on shipping method:

FOB: Destination - seller keeps on books until delivered

FOB: Shipping Point: Buyer puts on books when when items are shipped.
Goods on Consignment
Consignor keeps inventory until sold by retailer.
Goods Damaged or Obsolete
Not accounted for in inventory if they cannot be sold

If can be sold at a reduced rate, recorded at a conservative rate of their net realizable value which is sales price - cost of making sale.
Costing Methods
1.) Specific Identification
2.) First in-first out FIFO*
3.) Last in, last out LIFO
4.) Weighted Average

*Most commonly used