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196 Multiple choice questions

  1. Earnings from the sale of goods or services to costumers. Revenues are reported whether or not have yet been paid for.
  2. Is the rate of cash interest per period stated in the bond contract.
  3. is the current value of an amount to be received in the future; a future amount discounted fro compound inters.

    PV = ((1 / (1 + I)N ) x Amount
  4. Is the dollar difference between total current assets and total current liabilities.
  5. Is granted by the federal government for a period of 20 years for an invention.
  6. Records revenue when earned and expenses when incurred, regardless of the timing of cash receipts or payments.
  7. Assumes that the most recently purchased units are sold first.
  8. Information should be Relevant and Reliable.
  9. Are assets that will be used or turned into cash within one year.
  10. Is an unsecured bond; no assets are specifically pledged to guarantee repayment.
  11. 1. Identify the accounts affected and classify them by type of account.
    2. Determine the direction of the effect on each account.
    3. Verify that the accounting equation remains in balance.
  12. Is the difference between the selling price and par when the bond is sold for less than par.
  13. Is the acquisition cost of an asset less accumulated depreciation.
  14. Includes goods in the process of being manufactured.
  15. Reflects how many times average trade receivables are recorded and collected during the period.

    Receivables Turnover = Net sales / Average net trade account receivables
  16. Economic Return from Investing = (Dividends and Interest Received + Change in Fair Value) / Fair Value of Investments
  17. Record assets and liabilities acquired in a merge or acquisition at their fair value on the transaction date.
  18. Is an account that is an offset to, or reduction of, the primary accout.
  19. Is the sum to which an amount will increase as the result of compound interest.
  20. Is a bookkeeping system, that records transactions in chronological order.
  21. Is a short-term, highly liquid investment with an original maturity of less than three months.
  22. Is a potential liability that has arisen as the result of a past event.
  23. Is a monthly report from a bank that shows deposits recorded, checks cleared, other debits and credits and a running bank balance.
  24. Is the interest that is associated with the use of money over time.
  25. Is the process followed by entities to analyze and record transactions, adjust the records at the end of the period, prepare financial statements, and prepare the records for the next cycle.
  26. Or Associated companies, are investments in stock held for the purpose of influencing the operating and financing strategies of the entity for the long term.
  27. Assets have physical substance.
  28. Of presenting the operating activities section of the cash flow statement adjust net income to compute cash flow from operating activities.
  29. A detailed inventory record is maintained, recording each purchase and sales during the accounting period.
  30. Or Yield, is the current rate of interest on debt when incurred.
  31. When goods are shipped, title changes hands at shipment, and the buyer normally pays for shipping.
  32. Is a corporation's own stock that has been issued but subsequently reacquire and is still being held by that corporation.
  33. Estimates uncollectible accounts based on the age of each account receivable.
  34. Exception suggest that small amounts that not likely to influence a user's decision can be accounted for in the most beneficial manner.
  35. +/- Cash flow from Operating Activities (CFO)
    +/- Cash flow from Investing Activities (CFI)
    +/- Cash flow from Financing Activities (CFF)
    ----------------------------------------
    Change in Cash
  36. Is a series of periodic cash receipts or payments that are equal in amount each interest period.
  37. Is the difference between the selling price and par when the bond is sold for more than par.
  38. Are written promises that require another party to pay the business under specified conditions (amount, time, interest).
  39. CGS = Beginning Inventory + Purchases of merchandise - Ending Inventory
  40. Income statement, statement of retained earnings, balance sheet, and statement of cash flows.
  41. CFI- Are cash flow related to the acquisition or sale of the company's productive assets. Example, the purchase of additional equipment.
  42. Is the time period cover by the financial statements.
  43. (Cash discount) is a cash discount offered to encourage prompt payment of an account receivable.
  44. States that a business transactions are accounted for separately from the transactions of owners.
  45. Measures the sales generated per dollar of assets.
    TATR = Sales Revenue / Average Total Assets
    average (beginning balance + ending balance)/2
  46. Prepare a trial balance, journalize and post
    adjustments, prepare financial statements, and
    journalize and post the closing entries.
  47. System that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers.
  48. Is another name for bond principal, or the maturity amount of the bond.
  49. Refers to the total number of shares of stock that are owned by stockholders on any particular date.
  50. Reports investments in debt securities held to maturity at cost minus any premium or plus any discount.
  51. Is the feature of preferred stock that grants priority on preferred dividends over common dividends.
  52. Is the method similar to the Declining-Balance method and is applied over relatively short asset live to yield high depreciation expense in the early years.
  53. Are previously unrecorded expenses that need to be adjusted at the end of the accounting period to reflect the amount incurred and the related payable account. Example, if cash will be paid:

    Expense xxx
    Payable xxx
  54. Ratio that measures the sales dollar generated by each dollar of fixed assets used.

    Fixed Asset Turnover = Net Sales / Average Net Fixed Assets
  55. Is the stated rate of interest on bonds.
  56. Are dividends on cumulative preferred stock that have not been declared in prior years.
  57. Is to provide useful economic information to help external parties make financial decisions.
  58. Of presenting the operating activities section of the cash flow statement reports components of cash flow from operating activities as gross receipts and gross payments.
  59. Is an increase in the number of authorized shares by a specific ratio; it does not decrease retained earnings.
  60. Are tangible and intangible resources owned by a business and used in its operations over several years.
  61. Bases bad debt expenses on the historical percentage of credit sales that result in bad debts.
  62. Is a simplify method of amortizing a bond discount or premium that allocates an equal dollar amount to each interest period.
  63. Refers to the earnings of employees who work directly on the products being manufactured.
  64. Assumes that the first goods purchased are the first goods sold.
  65. Are entries necessary at the end of the accounting period to measure all revenues and expenses of that period.
  66. Is a distribution od additional shares of a corporation's own stock.
  67. Is the exclusive right to publish, use, and sell a literary, musical, or artistic work.
  68. Every transaction affects at least two accounts (dual effect), and the accounting equation MUST remain in balance after each transaction.
  69. CFO- Are cash flow that are directly related to earning income. Example, collecting cash from costumers, pay salaries, pay bills, pay to suppliers.
  70. Is the method that allocates the cost of an asset over its useful life based on a multiple of the straight-line rate (often two times).

    Depreciation Expense = ((Cost - Accumulated Depreciation) x ( 2 / Useful Life))
  71. Are both stocks and bonds issued by corporations to raise money for long-term purposes.
  72. Is the method that allocates the cost of an asset over its useful life based on the relation of it periodic output to its total estimated output.

    Depreciation Expense = ((Cost - Residual Value) / Estimated total production) x Actual Production
  73. Is used to report securities at their current market value.
  74. Is tangible property held for sale in the normal course of business or used in producing goods or services for sale.
  75. Are decreases is assets or increases in liabilities from peripheral transactions.
  76. Net sales revenue minus cost of sales.
  77. Ratio that reflects the portion of purchases of property, plan, and equipment financed from operating activities.

    Capital Acquisition Ratio = Cash Flow from Operating Activities / Cash Paid for Property, Plant, and Equipment
  78. Is the fee charged by the credit card company for its services.
  79. Is a list of all accounts with their balances to provide a check on the equality of the debits and credits.
  80. Is the basic voting stock issued by a corporation.
  81. Includes manufactured good that are complete and ready for sale.
  82. Ending inventory and cost of good sold are determined at the end of the accounting period based on a physical count.
  83. Is the nominal value per share of capital stock specified in the charter; servers as the basis for legal capital.
  84. Requires assets to be recorded at historical cost-cash paid plus the current dollar value of all none cash considerations given on the date of the exchange.
  85. The ratio shows the amount of resources generated for each dollar of interest expense.

    Times Interest Earned = (Net Income + Interest Expense + Income Tax expense) / Interest Expense
  86. Are increases in assets or decreases in liabilities from peripheral transactions.
  87. Ratio that suggests that the company relies on fund provided by creditors.

    Debt-to-Equity = Total liabilities / Stockholders' Equity
  88. Reports inflows and outflows of cash during the accounting period in the categories of operating, investing, and financing.
  89. Are manufacturing costs that are not raw material or direct cost labor. Example, cost of light, supervisor's salary.
  90. Is the excess of total revenues over total expenses.
  91. Is the preferred stock feature that requires specific current dividends not paid in full to accumulate for every year in which they are not paid. These cumulative preferred dividends must be paid before any common dividends can be paid.
  92. Is the net cash equivalent amount paid or to be paid for the asset.
  93. Are transactions that do not have direct cash flow effects; they are reported as a supplement to the statement of cash flow in narrative or schedule form.
  94. CFF- Are cash flow directly related to the financing of the enterprise itself. Example, the payment of money to investors and creditors.
  95. Should be prepared as the last step of the accounting cycle to check that debits equal credits and all temporary accounts have been closed.
  96. Is a bond contract that specifies the legal provision of a bond issue.
  97. "Cash-to-cash" is the time it takes for a company to pay cash to suppliers, sell goods and services to costumers, and collect cash from costumers.
  98. Is the permanent amount of capital defined by state law that must remain invested in the business; serves as s cushion for creditors.
  99. Are previously acquired assets that need to be adjusted at the end of the accounting period to reflect the amount of expenses incurred in using the asset to generate revenue. Example, if cash was paid and previously recorded:

    Expense xxx
    Prepaid Expense xxx
  100. Occurs when one company purchase all of the assets and liabilities of another and the acquired company goes out of existence.
  101. Measures a company's ability to charge premium prices and produce goods and services at low cost.
    Gross Profit Percentage = Gross Profit / Net sales
  102. Transfers balances in temporary accounts to Retained Earnings and establishes zero balances in temporary accounts.
  103. Ending Retained Earnings = (Beginning of Retained Earnings + Net Income) - Dividends
  104. Records revenues when cash is received and expenses hen cash is paid.
  105. Ratio that measures the portion of the income that was generated in cash.

    Quality of Income Ratio = Cash Flow from Operating Activities / Net Income
  106. When title changes hand on delivery, and the seller normally pays for shipping.
  107. Is the excess of the purchase price of a business over the fair value of the business's assets and liabilities.

    Goodwill = Purchase Price - Fair value of identifiable assets and liabilities.
  108. Are open accounts owned to the business by trade costumers.
  109. Return on investments based on dividends.

    Dividend Yield = Dividend per Share / Market Price per Share.
  110. Security and Exchange Commission, is the U.S government agency that determines the financial statements that public companies must provide to stockholders, and the rules that they must use in producing those statements.
  111. Is a contra-asset account containing the estimated uncollectible account receivable.
  112. Is capital stock that has no par value specified in the cooperate charter.
  113. Are all investments in stock or bonds held primarily for the purpose of active trading (buying and selling) in the near future (classified and short term).
  114. Is the ability to have an important impact on the operating, investing and financing policies of another company (from 20% to 50% of the outstanding voting shares).
  115. States that revenues are recognize when:
    1. Good or services are delivered.
    2. There is persuasive evidence of an arrangement for costumer payment.
    3. The price is fixed or determinable.
    4. Collection is reasonably assured.
  116. Revenues, Expenses and Net Income.
  117. Assets = Liabilities + Stockholders' Equity
  118. Are short-term investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change.
  119. Is a reduction of sales revenues for return of or allowances for unsatisfactory good.
  120. Are expenses that have been incurred but have not been paid at the end of the accounting period.
  121. Represent the dollar amount of resources the entity used to earn revenue during the period.
  122. Generally Accepted Accounting Principles, are the measurement rules used to develop the information in financial statements.
  123. Are obligations that will be settle by providing cash, goods, or services within the coming year.
  124. Are the process by which a company safeguards its assets.
  125. Includes goods held for sale in the ordinary course of business.
  126. Assets have special rights but not physical substance.
  127. Is money or any instrument that banks will accept for deposit and immediate credit to a company's account, such as check, money, or bank draft.
  128. Represent the total number of shares of stock that have been sold.
  129. Are investments made to earn a return on funds that may be needed for future short-term or long-term purposes (less than 20% of the outstanding voting shares).
  130. Is the systematic and rational allocation of the acquisition cost of an intangible asset over its useful life.
  131. Exception suggest that care should be taken not to over state assets and revenues or understate liabilities and expenses.
  132. Is a standardized format that organizations use to accumulate the dollar effect of transactions on each financial statement item. "Chart of account"
  133. Is a bond document that each bondholder receives.
  134. Is the ability to determine the operating and financing policies of another company through ownership of voting stock (company owns more than 50% of the outstanding voting shares).
  135. Is an exchange of assets or services to pay between a business and one or more external parties to a business or a measurable internal event such as the use of assets in operations.
  136. Is the ratio that evaluates the operating performance and profitability of a company.

    EPS = Net Income / Average number of shares of common stock outstanding during the period
  137. Is an accounting method for expressing the effects of a transaction on accounts in debits-equal-credits format.
  138. Meets a least one of the four criteria establish by GAAP and results in the recording of an asset and liability.
  139. Are all the entity's obligations not classified s current liabilities.
  140. Financial Accounting Standards Board, is the private sector body given the primary responsibility to work out the detailed rules that become GAAP.
  141. Is an exclusive legal right to use a special name, image, or slogan.
  142. Is used when an investor can exert significant influence over an affiliated; the method permits recording the investor's share of the affiliate's income.
  143. Ratio reflects how many times average inventory was produced and sold during the period.

    Inventory Turnover = Cost of Goods Sold / Average Inventory
  144. States that accounting information should be measure and reported in the national monetary unit.
  145. Is a stock that has specified rights over common stock.
  146. Refers to the sum of beginning inventory and purchases for the period.
  147. May be converted to other securities of the issuer (usually common stock).
  148. Writing off of an individual bad debt is recorded through a journal entry.

    Allowance for doubtful accounts xxx
    Accounts Receivables xxx
  149. Includes items acquire for the purpose of processing into finish goods.
  150. Is an independent party appointed to represent the bondholder.
  151. States that businesses are assumed to continue to operate into the foreseeable future.
  152. "Unearned revenues" are previously recorded liabilities that need to be adjusted at the end of the accounting period to reflect the amount of revenue earned. Example, when cash was received and previously recorded:

    Unearned revenue xxx
    Revenue xxx
  153. "Nominal" are Income Statement accounts that are closed to Retained earnings at the end of the accounting period.
  154. Are previously unrecorded revenues that need to be adjusted at the end of the accounting period to reflect the amount earned and the related receivable account. Example, cash will be received:

    Receivable xxx
    Revenue xxx
  155. Reports the revenues less the expenses of the accounting period.
  156. Is the process of allocating the cost of buildings and equipment over their productive lives using a systematic and rational method.

    Depreciation Expense xxxx
    Accumulated Depreciation xxxx
  157. Is the maximum number of shares of a corporation's capital stock that can be issued as specified in the charter.
  158. Is the estimated amount to be recovered by the company at the end of the asset's estimated useful life.
  159. Is the method that allocates the cost of an asset in equal periodic amounts over its useful life.

    Depreciation Expense = (Cost - Residual Value) x (1 / Useful life)
  160. Is a systematic and rational allocation of the cost of a natural resource over the period of its exploitation.
  161. Bases bad debt expenses on an estimate of uncollectible accounts.
  162. Is the ability to pay current obligations.
  163. Reports the amount of assets, liabilities and stockholders' equity of an accounting entry at a point in time.
  164. Is a method of amortizing a bond discount or premium on the basis of effective-interest rate; is the theoretically preferred method.
  165. Is an examination of the financial reports to ensure that they represent claim and comfort with GAAP.
  166. Indicates that the long life of a company can be reported in shorter time periods.
  167. Is the expense associated with estimated uncollectible account receivable.

    Bad debt expense xxx
    Allowance for doubtful accounts xxx
  168. "Footnotes" provide supplemental information about the financial condition of a company.
  169. If total expenses exceed total revenues.
  170. Debit (dr) is on the LEFT side of an account.
    Credit (cr) is on the RIGHT side of an account.
  171. Revenues from good shipped FOB Shipping Point are normally recognized at shipment. Revenues from goods shipped FOB destination are normally recognized at delivery.
  172. Is the expected service life of an asset to the present owner.
  173. Does not meet any of the four criteria establish by GAAP and does not cause the recording of an asset and liability.
  174. Are the company's debts or obligations. Which will be paid with assets or services.
  175. Ratio that measures how quickly management is paying trade accounts.

    Average Payable Turnover = Cost of Good Sold / Average Accounts Payable
  176. Are amounts associated with price changes of securities that are currently held.
  177. Are the economic resources owned by the company. Each of these economic resources is expected to provide future benefits to the firm.
  178. Is the organization for with financial data are to be collected.
  179. Of an asset is the difference between its acquisition cost and accumulated depreciation, its related contra-account.
  180. Helps measure the ability of the company to pay its short-term obligations with short-term assets.
    Current Ratio = Current Assets / Current Liabilities
  181. 1. Balance Sheet
    2. Income Statement
    3. Statement of Retained Earnings
    4. Statement of Cash flows
  182. May be called for early retirement at the option of the issuer.
  183. "Real" are the Balance Sheet accounts that carry their anding balances into the next accounting period.
  184. Ratio suggests good liquidity.

    Quick Ratio = Quick Assets / Current Liabilities
  185. Uses the weighted average unit cost of the goods available for sale for both cost of goods and ending inventory.
  186. Requires that expenses be recorded when incurred in earning revenue.
  187. Are all passive investments other than trading securities and debt held to maturity (short or long term).
  188. Indicates the amount of financing provided by owners of the business and earnings. Is the sum of the contribute capital + the retained earnings.
  189. Is a tool for summarizing transaction effects for each account, determining balances, and drawing inferences about a company's activities.
  190. Are investments in debt securities that management has the intent and ability to hold until maturity.
  191. Is another name for bond principal, or the maturity of a bond.
  192. Identifies the cost of the specific item that was sold.
  193. Are assets that occur in nature, such as minerals deposits, timber tracts, oil and gas.
  194. Is the amount (a) payable at the maturity of the bond and (b) on which the periodic cash interest payments are computed.
  195. Is the process of verifying the accuracy of both the bank statement and the cash accounts of a business.
  196. Reports the way that net income and the distribution of dividends affected the financial position of the company during the accounting period.