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  1. Accounting CycleIs 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.

          

  2. Tangible AssetsAre the economic resources owned by the company. Each of these economic resources is expected to provide future benefits to the firm.

          

  3. Cash EquivalentsAre short-term investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change.

          

  4. FOB Shipping Point (free on board)When goods are shipped, title changes hands at shipment, and the buyer normally pays for shipping.

          

  5. Long-Term LiabilitiesAre expenses that have been incurred but have not been paid at the end of the accounting period.

          

  6. Primary objective of external financial reportingIncome statement, statement of retained earnings, balance sheet, and statement of cash flows.

          

  7. Bad Debt ExpenseIs the expense associated with estimated uncollectible account receivable.

    Bad debt expense xxx
    Allowance for doubtful accounts xxx

          

  8. Receivables Turnover Ratio and formulaIs 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

          

  9. Net Income ("the bottom line")Is the interest that is associated with the use of money over time.

          

  10. Matching PrincipleTransfers balances in temporary accounts to Retained Earnings and establishes zero balances in temporary accounts.

          

  11. Allowance MethodOf presenting the operating activities section of the cash flow statement adjust net income to compute cash flow from operating activities.

          

  12. Accrued ExpensesAre 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

          

  13. Work In Proces InventoryIncludes goods in the process of being manufactured.

          

  14. Goods Available For SaleMay be called for early retirement at the option of the issuer.

          

  15. Contra-AccountIs an account that is an offset to, or reduction of, the primary accout.

          

  16. FOB Shipping Point vs FOB DestinationIs a simplify method of amortizing a bond discount or premium that allocates an equal dollar amount to each interest period.

          

  17. FASBGenerally Accepted Accounting Principles, are the measurement rules used to develop the information in financial statements.

          

  18. Bond PremiumIs the amount (a) payable at the maturity of the bond and (b) on which the periodic cash interest payments are computed.

          

  19. AssetsAre the economic resources owned by the company. Each of these economic resources is expected to provide future benefits to the firm.

          

  20. Balance SheetAre increases in assets or decreases in liabilities from peripheral transactions.

          

  21. Passive InvestmentsOr Yield, is the current rate of interest on debt when incurred.

          

  22. T-AccountIs an exclusive legal right to use a special name, image, or slogan.

          

  23. AccountingSystem that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers.

          

  24. Current LiabilitiesAre obligations that will be settle by providing cash, goods, or services within the coming year.

          

  25. Time Value of MoneyIs the interest that is associated with the use of money over time.

          

  26. Direct LaborIs 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

          

  27. Cash Flow from Investing Activities, and examplesRatio 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

          

  28. Bond PrincipalRequires 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.

          

  29. No-Par Value StockIs capital stock that has no par value specified in the cooperate charter.

          

  30. Straight-Line Depreciation and formulaIs a simplify method of amortizing a bond discount or premium that allocates an equal dollar amount to each interest period.

          

  31. Permanent Accounts(Cash discount) is a cash discount offered to encourage prompt payment of an account receivable.

          

  32. Statement of Retained Earningsis 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

          

  33. Fixed Assets Turnover and formulaRatio that measures the sales dollar generated by each dollar of fixed assets used.

    Fixed Asset Turnover = Net Sales / Average Net Fixed Assets

          

  34. Accrual Basis AccountingRecords revenue when earned and expenses when incurred, regardless of the timing of cash receipts or payments.

          

  35. Cash Flow from Operating Activities, and examplesCFI- Are cash flow related to the acquisition or sale of the company's productive assets. Example, the purchase of additional equipment.

          

  36. Order of the steps in the
    accounting cycle at the end of the accounting period
    CFO- Are cash flow that are directly related to earning income. Example, collecting cash from costumers, pay salaries, pay bills, pay to suppliers.

          

  37. LiquidityIs the ability to pay current obligations.

          

  38. Accrued LiabilitiesAre 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

          

  39. Modified Accelerated Cost Recovery System (MACRS)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.

          

  40. Stated RateIs the rate of cash interest per period stated in the bond contract.

          

  41. ConservatismException suggest that care should be taken not to over state assets and revenues or understate liabilities and expenses.

          

  42. Cumulative Dividend PreferenceRequires that expenses be recorded when incurred in earning revenue.

          

  43. Stock SplitIs an increase in the number of authorized shares by a specific ratio; it does not decrease retained earnings.

          

  44. Investments in AffiliatesAssets have special rights but not physical substance.

          

  45. Deferred Revenues"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

          

  46. Bank StatementIs a monthly report from a bank that shows deposits recorded, checks cleared, other debits and credits and a running bank balance.

          

  47. Accounts Payable Turnover Formulais 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

          

  48. Gross ProfitIs another name for bond principal, or the maturity amount of the bond.

          

  49. Dividend Yield and formulaHelps measure the ability of the company to pay its short-term obligations with short-term assets.
    Current Ratio = Current Assets / Current Liabilities

          

  50. Periodic inventory SystemA detailed inventory record is maintained, recording each purchase and sales during the accounting period.

          

  51. Bonds PayableAre both stocks and bonds issued by corporations to raise money for long-term purposes.

          

  52. Direction of TransactionsDebit (dr) is on the LEFT side of an account.
    Credit (cr) is on the RIGHT side of an account.

          

  53. Journal EntryIs an accounting method for expressing the effects of a transaction on accounts in debits-equal-credits format.

          

  54. Transaction AnalysisEvery transaction affects at least two accounts (dual effect), and the accounting equation MUST remain in balance after each transaction.

          

  55. Trading SecuritiesAre 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).

          

  56. Residual ValueIs the acquisition cost of an asset less accumulated depreciation.

          

  57. Securities Available for SaleRefers to the sum of beginning inventory and purchases for the period.

          

  58. Stock for ControlIs 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).

          

  59. LiabilitiesAre the company's debts or obligations. Which will be paid with assets or services.

          

  60. Net Book ValueRequires 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.

          

  61. Factory OverheadAre manufacturing costs that are not raw material or direct cost labor. Example, cost of light, supervisor's salary.

          

  62. Equity MethodOf presenting the operating activities section of the cash flow statement adjust net income to compute cash flow from operating activities.

          

  63. Capital Acquisition Ratio and formulaRatio 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

          

  64. GainsGenerally Accepted Accounting Principles, are the measurement rules used to develop the information in financial statements.

          

  65. Par ValueIs the nominal value per share of capital stock specified in the charter; servers as the basis for legal capital.

          

  66. Bond CertificateIs the difference between the selling price and par when the bond is sold for less than par.

          

  67. Temporary Accounts"Real" are the Balance Sheet accounts that carry their anding balances into the next accounting period.

          

  68. LossesAre the economic resources owned by the company. Each of these economic resources is expected to provide future benefits to the firm.

          

  69. Future ValueIs the estimated amount to be recovered by the company at the end of the asset's estimated useful life.

          

  70. AmortizationIs the systematic and rational allocation of the acquisition cost of an intangible asset over its useful life.

          

  71. Accounts ReceivablesAre open accounts owned to the business by trade costumers.

          

  72. InventoryIs an unsecured bond; no assets are specifically pledged to guarantee repayment.

          

  73. The three steps in the transaction analysis process1. 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.

          

  74. Long-Lived AssetsAssets have special rights but not physical substance.

          

  75. Present Value and formulaReturn on investments based on dividends.

    Dividend Yield = Dividend per Share / Market Price per Share.

          

  76. General JournalIs a bookkeeping system, that records transactions in chronological order.

          

  77. Net LossIf total expenses exceed total revenues.

          

  78. Fair Value MethodRecord assets and liabilities acquired in a merge or acquisition at their fair value on the transaction date.

          

  79. Accounting PeriodAre 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

          

  80. DepletionIs a systematic and rational allocation of the cost of a natural resource over the period of its exploitation.

          

  81. Continuity AssumptionIndicates that the long life of a company can be reported in shorter time periods.

          

  82. Natural ResourcesAre written promises that require another party to pay the business under specified conditions (amount, time, interest).

          

  83. Deferred ExpensesRepresent the dollar amount of resources the entity used to earn revenue during the period.

          

  84. Contingent LiabilityIs a potential liability that has arisen as the result of a past event.

          

  85. The Cash Flow Statement Equation+/- Cash flow from Operating Activities (CFO)
    +/- Cash flow from Investing Activities (CFI)
    +/- Cash flow from Financing Activities (CFF)
    ----------------------------------------
    Change in Cash

          

  86. Internal ControlsAre the process by which a company safeguards its assets.

          

  87. IndentureIs tangible property held for sale in the normal course of business or used in producing goods or services for sale.

          

  88. Gross Profit Percentage and formulais 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

          

  89. CashIs 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.

          

  90. Qualitative Characteristics of Financial InformationInformation should be Relevant and Reliable.

          

  91. Finished Goods InventoryIncludes manufactured good that are complete and ready for sale.

          

  92. Treasury StockIs a corporation's own stock that has been issued but subsequently reacquire and is still being held by that corporation.

          

  93. Declining-Balance Depreciation and formulaIs 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

          

  94. RevenuesIs the nominal value per share of capital stock specified in the charter; servers as the basis for legal capital.

          

  95. Accounting entityIs the organization for with financial data are to be collected.

          

  96. Common StockIs the basic voting stock issued by a corporation.

          

  97. Cost of Goods Sold EquationCGS = Beginning Inventory + Purchases of merchandise - Ending Inventory

          

  98. Debt-to-Equity and formulaIs 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.

          

  99. Amortized Cost MethodReports investments in debt securities held to maturity at cost minus any premium or plus any discount.

          

  100. Held-to-Maturity InvestmentsAre all the entity's obligations not classified s current liabilities.

          

  101. GAAPIs 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.

          

  102. SECSecurity 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.

          

  103. Economic Return from Investing formulaThe 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

          

  104. Face AmountIs another name for bond principal, or the maturity amount of the bond.

          

  105. Unrealized Holding Gains or LossesAre amounts associated with price changes of securities that are currently held.

          

  106. Order of the financial statements.Income statement, statement of retained earnings, balance sheet, and statement of cash flows.

          

  107. Current Ratio and formulaHelps measure the ability of the company to pay its short-term obligations with short-term assets.
    Current Ratio = Current Assets / Current Liabilities

          

  108. Preferred StockIs a stock that has specified rights over common stock.

          

  109. Stockholders' Equity (Owners' Equity)Indicates the amount of financing provided by owners of the business and earnings. Is the sum of the contribute capital + the retained earnings.

          

  110. Notes ReceivablesIs the amount (a) payable at the maturity of the bond and (b) on which the periodic cash interest payments are computed.

          

  111. Bank ReconciliationIs the systematic and rational allocation of the acquisition cost of an intangible asset over its useful life.

          

  112. Total Assets Turnover Ratio and formulaMeasures the sales generated per dollar of assets.
    TATR = Sales Revenue / Average Total Assets
    average (beginning balance + ending balance)/2

          

  113. Notes"Footnotes" provide supplemental information about the financial condition of a company.

          

  114. Allowance for Doubtful AccountsIs a contra-asset account containing the estimated uncollectible account receivable.

          

  115. Retained Earning EquationWhen title changes hand on delivery, and the seller normally pays for shipping.

          

  116. Callable BondMay be called for early retirement at the option of the issuer.

          

  117. Indirect MethodOf presenting the operating activities section of the cash flow statement adjust net income to compute cash flow from operating activities.

          

  118. Bond DiscountIs the difference between the selling price and par when the bond is sold for less than par.

          

  119. LIFO Last-in, First-out MethodAssumes that the first goods purchased are the first goods sold.

          

  120. Writing Off Uncollectible AccountsAssets have special rights but not physical substance.

          

  121. Post-Closing Trial BalanceShould be prepared as the last step of the accounting cycle to check that debits equal credits and all temporary accounts have been closed.

          

  122. Current Dividend PreferenceAre dividends on cumulative preferred stock that have not been declared in prior years.

          

  123. Coupon RateIs the stated rate of interest on bonds.

          

  124. Stock DividendIs a distribution od additional shares of a corporation's own stock.

          

  125. Quick Ratio FormulaRatio suggests good liquidity.

    Quick Ratio = Quick Assets / Current Liabilities

          

  126. Statement of Cash FlowsReports inflows and outflows of cash during the accounting period in the categories of operating, investing, and financing.

          

  127. TransactionAre increases in assets or decreases in liabilities from peripheral transactions.

          

  128. Separate-Entity AssumptionStates that a business transactions are accounted for separately from the transactions of owners.

          

  129. Merchandise InventoryIncludes goods held for sale in the ordinary course of business.

          

  130. Perpetual Inventory SystemDoes not meet any of the four criteria establish by GAAP and does not cause the recording of an asset and liability.

          

  131. Capital LeaseIs the estimated amount to be recovered by the company at the end of the asset's estimated useful life.

          

  132. Cost PrincipleIs the amount (a) payable at the maturity of the bond and (b) on which the periodic cash interest payments are computed.

          

  133. Income StatementOf presenting the operating activities section of the cash flow statement adjust net income to compute cash flow from operating activities.

          

  134. Aging of Accounts Receivable MethodEstimates uncollectible accounts based on the age of each account receivable.

          

  135. AnnuityIs a series of periodic cash receipts or payments that are equal in amount each interest period.

          

  136. Effective-Interest AmortizationOr Yield, is the current rate of interest on debt when incurred.

          

  137. Adjusting EntriesAre entries necessary at the end of the accounting period to measure all revenues and expenses of that period.

          

  138. Raw Materials InventoryException suggest that small amounts that not likely to influence a user's decision can be accounted for in the most beneficial manner.

          

  139. Issued SharesRepresent the total number of shares of stock that have been sold.

          

  140. Percentage of Credit Sales MethodBases bad debt expenses on the historical percentage of credit sales that result in bad debts.

          

  141. Outstanding SharesRefers to the total number of shares of stock that are owned by stockholders on any particular date.

          

  142. ExpensesEarnings from the sale of goods or services to costumers. Revenues are reported whether or not have yet been paid for.

          

  143. DebentureIs granted by the federal government for a period of 20 years for an invention.

          

  144. Goodwill and formulaIs 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.

          

  145. Specific Identification MethodAssumes that the first goods purchased are the first goods sold.

          

  146. Inventory Turnover and formulaRatio that suggests that the company relies on fund provided by creditors.

    Debt-to-Equity = Total liabilities / Stockholders' Equity

          

  147. Direct MethodIs used when an investor can exert significant influence over an affiliated; the method permits recording the investor's share of the affiliate's income.

          

  148. Time Period AssumptionIndicates that the long life of a company can be reported in shorter time periods.

          

  149. Merger"Footnotes" provide supplemental information about the financial condition of a company.

          

  150. The four basic statements:1. Balance Sheet
    2. Income Statement
    3. Statement of Retained Earnings
    4. Statement of Cash flows

          

  151. Earnings Per Share and formulais 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

          

  152. Unit-Measure AssumptionIs the sum to which an amount will increase as the result of compound interest.

          

  153. Convertible BondMay be converted to other securities of the issuer (usually common stock).

          

  154. Authorized Number of SharesRefers to the total number of shares of stock that are owned by stockholders on any particular date.

          

  155. Elements of the Income StatementAre 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).

          

  156. FIFO First-in, First-out MethodAssumes that the most recently purchased units are sold first.

          

  157. Cash Basis AccountingRecords revenues when cash is received and expenses hen cash is paid.

          

  158. FOB DestinationWhen title changes hand on delivery, and the seller normally pays for shipping.

          

  159. Accrued RevenuesAre 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

          

  160. Non-cash Investing and Financing ActivitiesAre 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.

          

  161. PatentIs granted by the federal government for a period of 20 years for an invention.

          

  162. Purchase MethodRecord assets and liabilities acquired in a merge or acquisition at their fair value on the transaction date.

          

  163. Intangible AssetsAre assets that will be used or turned into cash within one year.

          

  164. Stock for Significant InfluenceIs 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).

          

  165. MaterialityIs 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

          

  166. Par ValueIs another name for bond principal, or the maturity of a bond.

          

  167. CopyrightsIs the exclusive right to publish, use, and sell a literary, musical, or artistic work.

          

  168. Operating LeaseIs the rate of cash interest per period stated in the bond contract.

          

  169. AuditIs an examination of the financial reports to ensure that they represent claim and comfort with GAAP.

          

  170. Units-Of-Production Depreciation and formulaIs 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

          

  171. Operating cycle"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.

          

  172. Acquisition CostSystem that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers.

          

  173. Dividends In ArrearsRepresent the total number of shares of stock that have been sold.

          

  174. Average Cost MethodReports the amount of assets, liabilities and stockholders' equity of an accounting entry at a point in time.

          

  175. Sales DiscountIs an examination of the financial reports to ensure that they represent claim and comfort with GAAP.

          

  176. Closing EntryIs the organization for with financial data are to be collected.

          

  177. Market Interest RateOr Yield, is the current rate of interest on debt when incurred.

          

  178. Credit Card Discount"Nominal" are Income Statement accounts that are closed to Retained earnings at the end of the accounting period.

          

  179. Quality of Income Ratio and formulaIs 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)

          

  180. Estimated Useful LifeIs the expected service life of an asset to the present owner.

          

  181. Basic Accounting EquationAssets = Liabilities + Stockholders' Equity

          

  182. AccountsSystem that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers.

          

  183. Cash Flow from Financing Activities, and examplesCFI- Are cash flow related to the acquisition or sale of the company's productive assets. Example, the purchase of additional equipment.

          

  184. Trial BalanceIs an exclusive legal right to use a special name, image, or slogan.

          

  185. Legal CapitalIs a bookkeeping system, that records transactions in chronological order.

          

  186. DepreciationIs 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

          

  187. Revenue PrincipleStates 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.

          

  188. Times Interest Earned and formulaThe 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

          

  189. TrademarkIs granted by the federal government for a period of 20 years for an invention.

          

  190. Current AssetsAre assets that will be used or turned into cash within one year.

          

  191. TrusteeAre decreases is assets or increases in liabilities from peripheral transactions.

          

  192. Net Book ValueOf an asset is the difference between its acquisition cost and accumulated depreciation, its related contra-account.

          

  193. Cash EquivalentException suggest that small amounts that not likely to influence a user's decision can be accounted for in the most beneficial manner.

          

  194. Straight-Line AmortizationAre 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).

          

  195. Working CapitalIs the dollar difference between total current assets and total current liabilities.

          

  196. Sales Returns and AllowancesIs a reduction of sales revenues for return of or allowances for unsatisfactory good.