Term
| What does a balance sheet do? |
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Definition
| Reports assets and claims to assets at a specific point in time. |
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Term
| What does an income statement do? |
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Definition
| The income statement reports a company’s revenues and expenses and resulting net income or loss for a period of time. |
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Term
| What types of accounts are in a balance sheet? |
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Definition
accounts payable, accounts receivable, accumulated depreciation - buildings, accumulated depreciation - equipment, allowance for doubtful accounts, bonds payable, buildings, cash, common stock, copyrights, debt investments, discounts of bonds payable, dividends payable, equipment, goodwill, income taxes payable, interest payable, interest receivable, inventory, land, mortgage payable, notes payable, patents, Paid-in Capital in Excess of Par
Value—Common Stock, Paid-in Capital in Excess of Par
Value—Preferred Stock, preferred stock, premium on bonds payable, prepaid insurance, prepaid rent, salaries and wages payable, stock investments, supplies, treasury stock, unearned treasury revenue. |
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Term
| What types of accounts are in an income statement? |
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Definition
| amortization expense, bad debt expense, cost of goods sold, depreciation expense, dividend revenue, freight out, gain on disposal of plant assets, income tax expense, insurance expense, interest expense, interest revenue, lost on disposal of plant assets, maintenance and repairs expense, rent expense, salaries and wages expense, sales discounts, sales and returns allowances, sales revenue, selling expenses, service revenue, supplies expense, utilities expense |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| retained earnings (if no common stock), or net assets (for nonprofits) |
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Term
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Definition
| assets = liabilities + owners equity |
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Term
| Generally accepted accounting principles (GAAP) |
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Definition
| a set of rules that govern when, and how and why we record financial transactions the way we do. |
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Term
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Definition
groups together similar assets and similar liabilities,
using a number of standard classifications and sections. |
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Term
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Definition
assets that a company expects to convert to cash or use up
within one year or its operating cycle, whichever is longer. |
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Term
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Definition
the average time required to go from cash to
cash in producing revenue—to purchase inventory, sell it on account, and then collect cash from customers. |
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Term
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Definition
| obligations that the company is to pay within the next year or operating cycle, whichever is longer. |
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Term
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Definition
are generally: (1) investments in stocks and bonds of
other corporations that are held for more than one year, (2) long-term assets such
as land or buildings that a company is not currently using in its operating activities, and (3) long-term notes receivable. |
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Term
| property, plant, and equipment |
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Definition
assets with relatively long useful lives that
are currently used in operating the business. This category includes land, buildings, equipment, delivery vehicles, and furniture. |
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Term
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Definition
| the allocation of the cost of an asset to a number of years. |
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Term
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Definition
One common intangible
is goodwill. Others include patents, copyrights, and trademarks or trade names
that give the company exclusive right of use for a specified period of time. |
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Term
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Definition
as current assets divided by current liabilities. The current ratio is a more dependable indicator of liquidity than working
capital. |
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Term
| examples of current assets |
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Definition
| accounts receivable, cash, short term investments, inventories, prepaid expenses and other current assets |
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Term
| examples of long term assets |
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Definition
| stock investments, investments in real estate, investments in securities |
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Term
| examples of current liabilities |
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Definition
| notes payable, accounts payable, unearned sales revenue, salaries and wages payable, interest payable |
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Term
| examples of long term liabilities |
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Definition
| mortgage payable, notes payable, bonds, |
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Term
| debits and credits in T format and journal entries |
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Definition
___Debit___|___Credit___
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Term
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Definition
means that transactions that change a company’s
financial statements are recorded in the periods in which the events occur, even if cash was not exchanged. |
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Term
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Definition
| companies record revenue when they receive cash. They record an expense when they pay out cash. |
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Term
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Definition
| An accounting period that is one year long. |
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Term
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Definition
| Expenses paid in cash before they are used or consumed. |
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Term
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Definition
| Expenses incurred but not yet paid in cash or recorded. |
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Term
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Definition
| Revenues for services performed but not yet received in cash or recorded. |
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Term
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Definition
1. Prepaid expenses: Expenses paid in cash before they are used or consumed.
2. Unearned revenues: Cash received before services are performed. |
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Term
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Definition
1. Accrued revenues: Revenues for services performed but not yet received in cash or recorded.
2. Accrued expenses: Expenses incurred but not yet paid in cash or recorded. |
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Term
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Definition
| insurance, supplies, advertising, and rent. |
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Term
| examples of accrued expenses |
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Definition
| Interest, taxes, utilities, and salaries |
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Term
| revenue recognition principle |
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Definition
| requires that companies recognize revenue in the accounting period in which the performance obligation is satisfied. |
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Term
| expense recognition principle |
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Definition
| incurred expenses should be reported in the same period in the same period it recognizes the service revenue |
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Term
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Definition
| Amounts customers owe on account |
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Term
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Definition
| a written promise (as evidenced by a formal instrument) for amounts to be received. The note normally requires the collection of interest and extends for time periods of 60–90 days or longer. |
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Term
| recognizing accounts receivable |
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Definition
| A service organization records a receivable when it performs service on account. A merchandiser records accounts receivable at the point of sale of merchandise on account. When a merchandiser sells goods, it increases (debits) Accounts Receivable and increases (credits) Sales Revenue. |
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Term
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Definition
| An expense account to record losses from extending credit. |
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Term
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Definition
| resources that have physical substance (a definite size and shape), are used in the operations of a business, and are not intended for sale to customers. |
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Term
| historical cost principle |
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Definition
requires that companies record plant assets at
cost. Cost consists of all expenditures necessary to acquire an asset and make it ready for its intended use. |
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Term
| factors in computing depreciation |
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Definition
| cost, useful life, and salvage value |
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Term
| straight-line depreciation |
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Definition
companies expense an equal amount of depreciation each year of the asset’s useful life. Management must choose the useful life of an asset based on its own expectations and experience.
Cost - salvage value = depreciable cost.
Depreciable cost /useful life in years = depreciation expense |
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Term
| nonprofit organizations have... |
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Definition
NO owners
NO dividends
NO common stock
net assets NOT owners equity
contributions AND they are accountable to donors
Different names for financial statements:
o Balance sheet = Statement of Financial Position
o Income Statement = Statement of Activities
o Retained Earnings Statement = Statement of Net Assets |
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