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Accounting for Attorneys
USF Law's Accounting for attorney's class Fall 2010
49
Accounting
Graduate
12/07/2010

Additional Accounting Flashcards

 


 

Cards

Term
General Features of the Balanace Sheet
Definition

1. The Balance sheet is a snapshot in time

2. All listings are at historical cost

3. Two alternative names

a. Statement of Financial Conditions

b. Statement of Financial position

 

Term
General Features of the 2002 Sarbanes-Oxley Act
Definition

1. Establishes independent oversight for for SEC regulated business corporations

2. Establishes new responsibilities for corporate audit committees and corporate officers

3. Establishes new public company reporting requirements

4. Defines prohibited 'non-audit services' for accounting firms.

5. Increased penalties for corporate fraud

6. Requiring rules to address conflicts of interest.

Term
Definition of Assets
Definition
Assets are entities that provide a future benefit. They are listed at historical cost.
Term
Definition: Liabilities
Definition
Obligation to provide a future benefit to
another
Term
Alertantive terms for "Equity"
Definition
§ Different names based on different (legal) entities
§ Proprietorship
§ Partners’ Equity
§ Shareholders’ Equity
Term
Types of Assets
Definition

(1) Current assets--expected to be converted into cash or
consumed within one year (i.e., cash, marketable securities,
notes receivable, accounts receivable, inventories and prepaid
expenses)
(2) Long-term investments--not expected to be converted into
cash or used for more than a year
(3) Fixed assets--usually arranged according to permanence
(i.e., land, buildings, machinery and equipment, and furniture
and fixtures)
(4) Intangible assets (i.e., patents, copyrights and trademarks)

Term
Types of Liabilities
Definition


(1) Current liabilities (i.e., notes payable, accounts payable,
accrued liabilities, accrued taxes, and deferred revenue)
• Require payment in one year or less
(2) Long-term liabilities- (i.e., long-term debt, capital lease
obligations, and other liabilities)
• Do not require payment for at least one year

Term
Definition of Revenues
Definition
Increases from business activities, such as revenues or gains.
Term
Definition of expenses
Definition
Decreases due business activities. Such as losses or expenditures.
Term
Types of Capital stock
Definition
Common stock
Preferred stock
Additional paid-in capital
Retained earnings
Term
Types of Shares
Definition

1. Authorized--Stock authorized but not sold.
2. Issued--Stock that has been sold.
3. Outstanding--Stock in the hands of private shareholders
4. Treasury--Stock that has been repurchased by the corporation.

Term
How is the statement of cash flows divided?
Definition

Cash from Operations

Cash from Investments

Cash from Financing

Term
What are the 3 types of Financial statements?
Definition

1. The Balance sheet--measures assets, liabilities and equity.

2. The Income statement--measures revenues and expenditures.

3. Statement of Cash Flows--Measures the sources of a companys cash and cash equivalents.

Term
What are the general options for expenses paid for, but not yet consumed?
Definition
 a) Record payment as expense originally and
then defer unused portion at end of period
b) Record payment as prepaid item (asset) and
then accrue expense for portion used
 c) Record payment as expense for that portion
which will be used during the period and treat
balance as prepaid item (asset)
Term
What are the options of revenues received but not yet earned?
Definition
a) Record cash receipts as revenue originally and then
defer unearned portion at end of period
b) Record cash receipts as deferred or unearned
revenue (liability) and then accrue revenue for
portion earned
c) Record cash receipts as revenue for that portion
which will be earned during the period and treat
balance as deferred or unearned revenue (liability)
Term
Basic Revenue Recognition Requirements: FASB
Definition

 

Exchange transaction

Receipt of cash or readily ascertainable cash equivalent

Substantial completion of earnings process
Term

 

Revenue Recognition requirements per "Staff
Accounting Bulletin No. 101"

 

Definition
»Arrangement exists
»Delivery of product or performance of services
»Fixed or determinable sales price
»Collectibility reasonably assured
Term
What are the types of cost allocation?
Definition

Depreciation

Amortization

Depletion

Term
Definition: Depreciation
Definition
Allocation of the cost of an asset over the span of its useful life.
Term
Definition: Amortization
Definition
The depreciation of intangible assets
Term
Definition: Receivable Turnover
Definition

 

How many times, on average, does a company turn its receivables into cash during an accounting period?

Term

Definition: Days’ Sales Uncollected

Definition

How long, on average, does it take a company to collect its accounts receivables?

Term
How is the uncollectable accounts expense accounted for in the financial statements?
Definition

 

Uncollectible Accounts Expense appears on the income statement as an operating expense

Term
Where is the allowance for allowance for uncollectable accounts on the balance sheet?
Definition
The allowance for collectable accounts appears as a subset of accounts receivable on the liabilities portion of the balance sheet.
Term
Formula for compound interest?
Definition
Pn=Po(1+interest rate)years
Term
Defintion: Cash equivalents
Definition
Cash equivalents are short-term, highly liquid investments that are both: (a) readily convertible to known amounts of cash, and (b) so near their maturity that they present insignificant risk of changes in interest rates
Term
Five Steps of
Financial Statement Analysis
Definition

 

Assessing the business environment.
Reading and studying the financial statements and footnotes.
Assessing earnings quality.
Analyzing the financial statements.
Predicting future earnings
and/or cash flow.
Term
Return on Equity
Definition

Net Income/Average stockholder's equity

 

It measures the effectiveness at managing capital provided by owners.

Term
Return on Assets
Definition

Net income +[Interest Expense (1-Tax Rate)]/

Average total assets

 

Measures the effectiveness of the company at managing capital provided by investors.

Term
Return on Sales (Profit Margin)
Definition

Net income + [Interest expense (1-tax rate)]/Net Sales

 

Measures the company's ability to successfully make and sell its product while controlling it's costs.

Term
Capital Structure Leverage
Definition

Average total assets/Average total liabilities

 

Measures the extent to which a company relies on borrowings.

Term
Debt/equity ratio
Definition

Average liabilites/average stockholder's equity

 

Compares liabilities to stockholder's equity

Term
Long term debt ratios
Definition

Long term liabilities/Total assets

 

Measures long term debts as a source of asset financing

Term
Current Ratio
Definition

Current Assets/Current Liabilites

 

Is a quick measure of a company's ability to meet it's debts as they come due.

Term
Quick ratio
Definition

Cash+Marketable securities+Net receivables/Current liabilities

 

More stringent "Quick Look" at solvency

Term
Interest coverage
Definition

(Interest Expense+Tax expense+Net Income)/Interest Expense

 

Compares annual funds available to meet annual interest

Term
Accounts Payable turnover
Definition

Cost of goods sold/Average accounts payable

 

Measures the degree to which accounts payable are a source of financing.

Term
Receivables Turnover
Definition

Net Credit Sales/Average Accounts Receivable

 

Measures the times that the trade receivables were recorded, collected and recorded in the same period

Term
Inventory turnover
Definition

Cost of goods sold/Average inventory

 

Measures the speed at which inventories move through operations

Term
Total Asset Turnover
Definition

Sales/Average total assets

 

Measures the speed at which all assets move through operations

Term
Earnings per share
Definition

net income/avg. shares outstanding

 

Primary measure of a company's performance

Term
Price-Earnings ratio
Definition
Market price per share/Earnings per share
Term
Dividend yield ratio
Definition

Dividends per share/ Mkt. Price per share

 

Indicates cash return on shareholder's investment

Term
Under MCBA when is a company prohibited from paying a dividend?
Definition

If after paying the dividend

 

a) The total assets would be less that the sum of its total liabilities, plus the amount that would be needed to satisfy the rights of preferential stockholders.

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