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Financial Accounting - CLEP 9 - 15
Vocabulary words - chapters 9 -15
Terms in this set (65)
Accrual basis accounting
10. The system in which income is recognized when earned and expenses are recognized when incurred.
Cash basis accounting
10. The system in which income and expenses are recognized when cash changes hands. This does not meet GAAP.
10. The account that shows the total of all the individual records in the subsidiary record.
10. Assets that are available to spend within a year.
Direct write-off method
10. The method that recognizes bad-debt expenses in the period the business writes off the accounts receivable. Not GAAP.
10. Assets that are expected to last longer than one year.
10. A sale for which payment is to be made later.
10. Assets that have a life longer than one year.
10. A separate record containing the details of a control account. Example: The accounts receivable subsidiary record lists all who owe the company money, the total of which is reflected in accounts receivable.
10. When a company gives up collecting an account receivable, it writes off the account by removing it from company records.
Discount a note
11. To sell a note to a bank that subtracts a discount, giving the seller the proceeds.
11. The dollar amount written on the face of a note.
11. The interest rate written on the face of a note.
Future value of a note
11. The amount borrowed plus the interest up to the maturity date.
A note with an interest rate written on the face, whose face amount is the present value.
11. The person who borrows money and writes a note promising to pay in the future.
11. The future value of a note.
11. A note without an interest rate written on the face, whose face amount is the future value.
Present value of a note
11. The amount borrowed, or the principal. Shows the present value as the face amount.
11. The loan amount that remains unpaid.
Proceeds of a note
11. The amount a bank gives in exchange for a note.
11. Assets quickly changeable into cash: cash, short-term investments, and net accounts receivable.
12. An account that is subtracted from Purchase to compute Net Purchases. Exp: Purchases Discount and Purchases Returns and Allowances
12. Cost of goods sold
12. The cost paid for the merchandise sold.
12. The inventory system that assumes the oldest items in inventory are the first ones sold.
12. Sales - Cost of goods sold =
12. The inventory system that assumes the latest items purchased are the first ones sold.
Periodic inventory method
12. The inventory method that keeps track of merchandise costs in various purcahses and contra-purchases accounts and then computes cost of goods sold on the income statement. Inventory on the books is adjusted only at year-end.
Perpetual inventory method
12. The inventory method that increases the inventory account with every purchase and lowers the inventory account with every sale.
12. A cost of goods sold account used in the periodic inventory method to keep track fo all merchandise bought for resale during the year.
Purchases discount account
12. A contra-purchases account used under the periodic inventory method to keep track of discounts granted by vendors for paying early.
Purchases returns and allowances
12. A contra-purchases account used under the periodic inventory method to keep track of refunds a business gets for returning merchandise to vendors, or reductions in price (allowances) the vendors offer to resolved complaints.
12. The inventory system that keeps track of the actual historic cost of each inventory item. When that item is sold, the cost flows into cost of goods sold.
12. The inventory system that averages the cost of all items in inventory and assigns that averaged cost to the items sold.
Consumption method for supplies
13. The method of accounting for operating supplies that recognizes supplies as an expense when they are consumed. When supplies are purchased, the debits are stored in supplies inventory. The supplies expese account is not touched until the inventory is adjusted.
13. Assets that represent expenses paid in advance that provide future benefits to the business.
Purchase method for supplies
13. The method of accounting for operating supplies that recognizes supplies as an expense when they are purchased. When supplies are purchased, the debits are stored in supplies expense. The supplies inventory is not touched until the end of the year.
14. Assets that have a life longer than one year. Also fixed and plant assets.
14. Recorded the cost as an asset.
14. Recorded the cost as an expense.
14. Assets that have a life longer than one year. Also capital and plant assets.
14. Assets that have a life longer than one year. Also capital and fixed assets.
Clear the bank
9. A check has ______ ___ _____ if the payee has presented the check to the bank and the bank has paid it by taking money out of the maker's account.
Deposit not shown
9. A bank deposit made too late to show up on the bank statement.
9. The person who writes a check.
9. Securities (pieces of paper that represent ownership in investments such as stocks, bonds, etc.) that are traded on public exchanges, such as the New York Stock Exchange.
9. An expense account for small expenses that are not important enough to have their own account.
9. Expenses or revenues come from transactions that are not part of normal business operations.
9. A check is _________ when it has not yet cleared the bank.
9. The person to whom a check is written.
Petty cash system
9. A system for maing small payments with cash.
9. A gain or loss that happens when an asset is sold.
9. Investments that the business plans to resell within one year. Also called investments in marketable securities.
9. Short-term investments fro which the purpose is to resell them for a profit.
9. A gain or los as a result of a business asset going up or down in value, but the asset has not been sold.
Accelerated depreciation methiod
15. A depreciation method that results in higher depreciation expense in an asset's early years.
15. The amount of the hisorical cost of an asset that gets allocated over the useful life of the asset.
15. An asset is said to be fully depreciated when its book value equals its salvage value. Same as Fully Depreciated.
15. Assumptions about the purchase dates of fixed assets in order to simplify the depreciation process.
15. A list of all fixed assets in the company, their purhase dates, their depreciation methods, and their depreciation each year.
15. An asset is said to be fully depreciated when its book value equals its salvage value.
15. Modified Accelerated Cost Recovery System, for which IRS tables tell the rate by which to multiply an asset's historical cost.
15. The esimated amount recieved for an asset at the end of its useful life. Also called salvage value and scrap value.
15. The esimated amount recieved for an asset at the end of its useful life. Also called residual value and scrap value.
15. The esimated amount recieved for an asset at the end of its useful life. Also called salvage value and residual value.
Recommended textbook explanations
Glencoe Accounting: First Year Course
Fundamental Financial Accounting Concepts
Christopher Edmonds, Frances M McNair, Philip R. Olds, Thomas P. Edmonds
Cost Accounting: A Managerial Emphasis
Charles T. Horngren, Srikant M. Datar
Financial and Managerial Accounting
Barbara Chiappetta, John J. Wild, Ken W. Shaw
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