Financial accounting Chapters 1-4
Terms in this set (40)
owners claim on assets of an entity
owners equity in a corporation
part of the stockholders equity that represents income earned less paid over the life of the entity
sum of revenue and expenses (rev + expenses)
excess of revenue over expenses (Rev/expenses)
cash, accounts receivable, land owned by company, building.
accounts payable, notes payable.
capital stock, retained earnings
shows what obligations will be due in the future, and the assets needed.
the income statement
shows the revenues and expenses for a time period
statement of cashflows
show where cash came from and how it was used during the period
provide important details about the company's accounting policy and other key factors, that affected it's financial condition and performance.
a quality of accounting information that makes it comprehensible to those willing to spend the time.
allows comparisons to be made between and among companies
the process of allocating the cost of long - term tangible assets over it's useful life
allows the user to compare two or more accounting periods for a single company
the magnitude of accounting information omission or misstatement that will affect the judgement of someone relying on the information
the practice of using the least optimistic estimate when two estimates of accounts are about equally likely
time period between purchase of inventory and the collection of any recievable from the sale of inventory
realized in cash or sold or consumed during the operating cycle or within one year of the cycle is shorter
property, plant equipment, intangibles
obligations that will be resolved in a year
the ability of a company to pay it's debts as they come due
current assets minus current liabilities (current assets - current liabilities)
Current assets divided my current liability
net income divided by sales (sales, sales revenue, operating revenue, revenue)
evidence that something has happened
record of transaction at the cost bases ( not carried at market value but original cost value)
format for showing amounts coming into and leaving an account.
like accounts receivable, appears on the balance sheet. (when a company has recorded revenue but will only receive cash at a later date)
accrued salaries, wages, and related benefits reported under the current liabilities.
Examples: gift cards, includes in other current liabilities the amount of gift cards that have not yet been redeemed. (receive cash prior to making a sale)
represents the amounts the retailer has paid in advance for items, such as supplies. The company will record expenses as supplies are used. (pay cash prior to actually incurring an expense.)
the process of recording or incorporating an item into the financial statements of an entity a asset, a liability, a revenue, an expense or the like.
a system of accounting in which revenues are recognized when cash is received and expenses are recognized when the cash is paid.
a system in which revenues are recognized when performed obligation is satisfied and expenses are recognized when incurred.
inflows of assets or settlements of liabilities from delivering or producing goods, rendering services, or conducting other activities.
revenue recognition principle
revenues are recognized when a performance obligations is satisfied
the association of revenue of a period with all of the costs necessary to generate that revenue.
Example: cost of goods expense with sales revenue. The cost of goods sold is the cost of inventory associated with a particular sale
revenues and expenses get dumped into retained earnings. ( nominal account.)
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