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gather and analyze financial data, talk to executives, monitor markets, predict earnings per share/sales

information services

provide online information to be useful is should be relevent, reliable, consistent and comparibility

Form 10k Annual Report

filed annually with annual results, must be filed with 60 days of fiscal year end, F/S with notes

Form 10Q Quarterly Report

filed within 30 days of quarter end, F/S with notes but less detail and usually not audited

Form 8K current report

current events of significance, change in auditor or executive, sale of large # of stock


capable of influencing a desicion, predictive value, feedback value, timeliness


accurate, unbiased, verifiable, presentational faithfulness, nuetrality


for a company, they have used similar accounting methods over time


similiar accounting methods have been applied by companies, can compare two different companies


expected to be converted into cash or used up within one year


listed in order of liquidity

long-term investment

purchases of securities (stocks,bonds,etc) of other firms expected to be held more than 1 year

property, plant and equipment

physical assets expected to be useful for more than one year (fixed assets)

intangible assets

patents, trademarks

contributed capital

monies raised by selling stock to the public (stockholders)

common stock par value

legal capital

additional paid in capital common stock

amount received above par value

liquidity measure

ability to meet its current maturing debts

working capital

current assets- current liabilities

current ratio

current assets/current liabilities, how many times can is pay of CL with CA, want to be more then one


total liabilites/total SE, for every $1 of SE have $X of debt, higher ratio= greater risk

gross profit percentage

(net sales-COGS)/net sales, gross profit/sales, need higher gross profit to cover other costs and to generate income

income tax expense

income before tax*tax rate

discontinued operations

sale of a major segment of the business 1. operating income/ loss of discontinued segment for the period 2. Gain on loss on the sale of the segment

extraordinary items

gains or losses that are both unusual and infrequent in occurence, rare flood

net income- the bottom line

comprehensive income= your net income+- items such as unrealized G/L on adjustments, foreign currency translations

return on assets

net income/ avg. total assets, how much net income does each $1 of assets generate

return on equity

net income/ avg SE, how much income does each $1 of equity generate

operating activities

activities related to cash inflows and outflows resulting from the normal operations of the firm, CA and CL changes effect this

investing activities

from the buying or selling of any long term assets. ST and LT investments and making and collection loans

financing activities

from transactions with owners and creditors who supply "funds" to operate the firm and a return to the overs LT and ST loans payable, buy back on stock

increase in assets

decrease in cash

increase in liabilities

increase in cash

revenue recorded

this should happen when an exchange has taken place, earning process is nearly complete, collection is probable

FOB shipping point

Free on board at the shipping point, the buyer is paying the frieght and takes control when the good is shipped- record sale when good is shipped

FOB destination

free on board at the destination point, so the seller pays the freight and the buyer takes control when the good reaches the destination, record sale when good reached dest. should be consistent and disclose the policy

net sales

sales- sales discounts- sales returns and allowances- credit card discounts

accounts recievable

open account from customers credit sales, customer is allowed to buy continually as long as they pay balances when due

notes receivable

specific instrument signed with specific maturity date and interest rate stated


normal course of business


an advance to an officer or employee is an example

bad debt

results from credit customers who will not pay the business the amount they owe, regardless of collection efforts

net realizable value

accounts recievable- allowance for doubtful accounts

recievables turnover ratio

net sales/ avg. accounts receivable, number of times you collect your A/R in a period, higher ratio indicates quicker collection of accounts receivable and lower indicates that company may be giving customers too long to pay which could lead to poor cash flow

average age of accounts receivable

365/receivables turnover ratio, number of days it takes to collect accounts receivable on average, typically would like to see this 30-60 day range

bad debt as a percentage of sales ratio

bad debt expense/ net sales, calculate bad debt expense in future years

cash and cash equivalents

cash, checks, money order, bank draft, certificates of deposit, US goverment treasury bills

internal controls

policies and procedures designed to safeguard all assets of the business to ensure the accurary of financial records

separation of duties

a internal control of cash, separate jobs, separate procedures, separate those that handle cash and those that account for it

separate jobs

of receiving and distributing cash, otherwise one could take and keep cash easily

separate procedures

of accounting for cash reciepts and cash disbursements, without these one could cover up theft of cash

separate those to handle cash and those who account for it

second counting of cash for extra control

daily deposit

control to keep minimum cash on hand to avoid loss if theft occurs

separate approval for purchases and for payments

once purchase is approved, resources are committed to payments to prevent buying unneeded iteams

prenumbered checks

contril that can account for every supporting document and can trigger journal entries

check signatures

control, check approval by different parties to assure disembursement is properly approved

mandatory vacations

control, if you have to take a vacation fraud may surface because person cant cover it

bank reconciliations

control, done by someone other then the person handling deposits and disbursements, allows checking of other peoples work

outstanding checks

check written and recorded on the books to get books cash balance but is not yet cleared the bank and thus is not deducted from bank statement

deposits in transit

collections recorded on the books but dont show up in the bank statement, could be in the deposit box or recorded after bank statement was produces

bank service charges

charges by the bank deducted on bank statement, not yet recorded on the books

interest earned

one the bank statement, not on the books

NSF checks

received by the company and recorded on the books, deposited at the bank but bounced, must decrease cash on the book


only on the book side, one subracting entry and one adding entry

collection of cash

a decrease in A/R or increase in Unearned revenue indicates

earned but cash not yet received

an increase in A/R and an decrease in Unearned revenue


assets held for resale or for use in the production of goods for sale

merchandise inventory

goods purchased for resale

raw material inventory

RMI, items acquired for processing into finished goods (lumber, steel)

Work in Progress inventory

WIP, goods in the process of being manufactured but not yet completed

Finished Good Inventory

FG, completed good ready for sale

inventory cost

includes all costs incurred (ordinary and nessescary) to get inventory in usuable or salable condition

Cost of Goods Sold COGS

number of units sold times the cost assigned to each unit, a major expense item for most non-service businesses


cost goods available for sale, BI+Purchases



periodical inventory system

only periodically determine ending inventory and can only calculate COGS when we know EI

perpetual inventory system

all purchase increase inventory and all sales decrease inventory with every event, CGAS and COGS are updated daily is not an hourly process


first in first out


last costs in, first costs out

Average Unit Cost

total cost of goods available for sale/total units available

replacement cost

current purchase, price for an identical item

inventory turnover

COGS/average inventory, measure of efficiency and effectiveness of managing inventory, higher ratio= more effective

number of days inventory held

365/ inventory turnover ratio, number of days it takes to sell inventory


property, plants and equipment, subject to depriciation

intangible assets

subject to amortization, ex- patent trademarks

capital expenditure

to record as an asset in account, major overhaul, extends life beyond original estimate or increase productivity

revenue expenditure

to record as an expense, maintains normal operating conditions

acquisition cost

historical cost at purchase, includes ordinary costs to put the assets into service

estimated useful life

estimating how long the item will last (deterioriation and obsolescence)

straight line rate


residual value

at end of use

depreciable base

cost - residual value (C-R), used to determine amount to be expensed over each depreciation period


1/life x (cost-salvage)

gain or loss on sales

difference between the net book value (cost-accumulated depreciation at time of sale) and selling price

accelerated depreciation

double declining balance, Net Book Value x 2 SLR

units of production

(cost-salvage)/total estimated units produced x units produced

fixed asset turnover ratio

net sales (operating revenue)/ Avg. net fixed assets, measure of how efficiently a company utilizes its investments in PP&E over time

average age of PP&E

accumulated depreciation/ Depreciation Expense, general idea of years an asset has been used to date, straight line method

impairment of assets

estimated future cash flows of assets is less than the book value of the asset

intangible assets not on balance sheet

internally generated research and development, advertisings, reputation, market value of trademarks, patents, copyrights

intangible assets on balance sheet

patents, trademarks, copyrights, technology, franchises


excess of purchase price over identifiable net assets of the firm acquired, amortize is no longer permitted of this asset, indefinate life and must be evaluated for impairment at least annually

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