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Flashcards in Chapter 4 Deck (22)
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1
Q

accounting cycle

A

The procedures needed to process transactions through an accounting system; including journalization, posting, adjusting and preparing financial statements.

2
Q

capital stock

A

A non-specific reference to the ownership interests of shareholders in a corporation.

3
Q

closing process

A

The process by which temporary accounts are “zeroed” out and the effects transferred to retained earnings.

4
Q

current assets

A

Assets that will be converted into cash or consumed within one year or the operating cycle, whichever is longer.

5
Q

current liabilities

A

Obligations that will be liquidated within one year or the operating cycle, whichever is longer.

6
Q

current ratio

A

A measure of liquidity, calculated by dividing current assets by current liabilities.

7
Q

full disclosure principle

A

All relevant facts that would influence investors’ and creditors’ judgments about the company are disclosed in the financial statements or related notes.

8
Q

income summary

A

A non-financial statement account used only to facilitate the closing process by summarizing and zeroing-out the revenue and expense accounts.

9
Q

intangible asset

A

Lack physical existence, and include items like purchased patents and copyrights.

10
Q

liquidity

A

The ability of a firm to meet its near-term obligations as they come due.

11
Q

long-term investments

A

Investments made for long-term holding purposes; including land for speculation, securities of other companies, etc.

12
Q

long-term liabilities

A

Any obligation that is not current, and include bank loans, mortgage notes, and the like.

13
Q

nominal accounts

A

Accounts that will be reset to a zero balance with each new accounting period; revenue, expense, and dividend accounts (also called “temporary” accounts.

14
Q

operating cycle

A

The period of time it takes to convert cash back into cash (i.e., purchase inventory, sell the inventory on account, and collect the receivable)

15
Q

other assets

A

The category of a classified balance sheet for reporting assets that are not logically attached to one of the other specific sections.

16
Q

post-closing trail balance

A

Reveals the balance of accounts after the closing process, and consists of balance sheet accounts only.

17
Q

property, plant, & equipment

A

Assets with long lives that will be used in an entity’s production processes; land, building, and equipments.

18
Q

quick ratio

A

An extreme measure of liquidity, calculated by dividing quick assets (cash, short-term investments, and accounts receivable) by current liabilities.

19
Q

real accounts

A

Asset, liability, and equity accounts; balances are carried forward from the end of one period into the beginning of the next period.

20
Q

reversing entry

A

Optional accounting procedure which may prove useful in simplifying record keeping; a journal entry to “undo” an adjusting entry.

21
Q

temporary accounts

A

Accounts that will be reset to a zero balance with each new accounting period; revenue, expense, and dividend accounts (also called “nomial” accounts)

22
Q

working capital

A

The difference between current assets and current liabilities.