Term
|
Definition
| Service Revenue - Expenses = Net Income. |
|
|
Term
|
Definition
|
|
Term
|
Definition
| Capital Stock + Retained Earnings |
|
|
Term
|
Definition
Total current assets / Total current liabilities
Measures a company's ability to pay its current liabilities.
Strong Ratio: 1.5
Weak Ratio: 1.0 |
|
|
Term
|
Definition
Total liabilities / Total assets
Measures an org's overall ability to pay its debts.
Low debt ratio is best.
Safe Ratio: .60 or lower
Risky Ratio: .80 or higher |
|
|
Term
| What document summarizes the effects of all the entity's transactions and adjustments throughout the period? |
|
Definition
Accountant's work sheet with columns for:
- Trial balance
- Adjustments
- Adjusted trial balance
- Income statement
- Balance sheet
|
|
|
Term
| What is the last major step in the accounting cycle? |
|
Definition
Closing entries for the temporary accounts:
- Revenues (Income Statement account)
- Expenses (Income Statement account)
- Withdrawals
|
|
|
Term
| Why close out the revenues, expenses and withdrawal accounts? |
|
Definition
Because these temporary accounts have balances that relate only to one accounting period and do not carry over to the next period. |
|
|
Term
| Which accounts do not get closed out? |
|
Definition
Permanent (balance sheet) accounts:
- Assets
- Liabilities
- Capital
The balances of these accounts carry over to the next period. |
|
|
Term
| How do businesses classify their assets and liabilities for reporting on the balance sheet? |
|
Definition
Current (within one year or the entity's operating cycle if longer than a year).
Long-term (not current). |
|
|
Term
|
Definition
|
|
