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ACC 201 P5-1 Matching
Problem 5-1
24
Accounting
Undergraduate 2
10/26/2011

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Cards

Term
User of Financial Statements
Definition
investors, creditors, and other interested in the business
Term
Objective of Financial Statements
Definition
To Design and prepare the financial statements to assist the users in making decisions
Term
Relevance
Definition
Reported the amount of depreciation expense because it likely will affect important decisions of statement users
Term
Reliability
Definition
Engaged an outside independent CPA to audit the financial statements
Term
Separate entity
Definition
Established a policy not to include in the financial statements the personal financial affairs of the owners of the business
Term
Continuity
Definition
Accounting and reporting assume a "going concern"
Term
Unit of Measure
Definition
Counted (inventoried) the unsold items at the end of the period and valued them in dollars
Term
Time period
Definition
Dated the income statement "For the year ended December 31, 2011"
Term
Revenues
Definition
Recorded a sale of merchandise $1,000 on credit
Term
Expenses
Definition
Used services from outsiders; paid cash for some and put the remainder on credit
Term
Gains
Definition
Sold an asset at a gain that was a peripheral or incidental transaction
Term
Losses
Definition
Sold an asset at a loss that was a peripheral or incidental transaction
Term
Assets
Definition
Acquired a vehicle of use in operating the business
Term
Liabilities
Definition
Sold and issued bonds payable of $1 million
Term
Stockholder's Equity
Definition
Assets of $500,000 - Liabilities of $300,000
Term
Cost
Definition
Paid a contractor for an additional
Term
Revenue
Definition
Established an accounting policy that sales revenue shall recognized only when ownership to the goods sold passes to the customer
Term
Matching
Definition
Sold merchandise and service for cash and on credit during the year; then determined the cost of those goods sold and the cost of rendering those services
Term
Full disclosure
Definition
Disclosed in the financial statements all relevant financial information about the business; necessitated the use of notes to the financial statements.
Term
Materiality threshold
Definition
Acquired an asset (a pencil sharpener that will have a useful life of five years) and recoreded it as an expense when purchased for $1.99
Term
Cost-benefit constraint
Definition
The user value of a special financial report exceeds the cost of preparing it.
Term
Conservatism constraint
Definition
Valued an asset, such as inventory, at less than its purchase cost because the replacement cost is less.
Term
Special industry practices
Definition
Used special accounting approaches because of the uniqueness of the industry
Term
Special industry practices
Definition
Used special accounting approaches because of the uniqueness of the industry
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