31 terms

Chapter 15 Accounting


Terms in this set (...)

cost of merchandise sold
the original price of all merchandise sold during a fiscal period
current liabilities
liabilities due within a short time, usually within a year
earnings per share
the amount of net income after federal income tax belonging to a single share of stock
financial ratio
a comparison between two items of financial information
gross profit on sales
the revenue remaining after cost of merchandise sold has been deducted
long term liabilities
liabilities owed for more than a year
net sales
total sales less sales discount and sales returns and allowances
par value
a value assigned to a share of stock and printed on the stock certificate
price earning ratio
the real drip shop between the market value per charge and earnings per share of stock
statement of stockholders' equity
a financial statement that shows changes in a corporation's ownership for a fiscal period
supporting schedule
a report prepared to give details about an item on a principal financial statement
financial statements provides the primary source of information needed by owners and managers to make decisions on the future activity of a business
reporting financial information the same way from one fiscal period to the next is an application of the accounting concept adequate disclosure
an income statement is used to report a businesses financial progress
an income statement for a merchandising business has three main sections: revenue section, cost of merchandise sold section, and expense section
cost of merchandise sold is also known as cost of goods sold
revenue less cost of merchandise sold equals net income
calculating a ratio between gross profit on sales and net sales enables management compare its performance to prior fiscal periods
total expenses on an income statement are deducted from the gross profit on sales to find net income before federal income tax
for a merchandising business, every sales dollar reported on the net income statement includes only three components: gross profit on sales, total expenses, and net income
when a business's expenses are less than the gross profit on sales, the difference is known as a net loss
increasing sales revenue while keeping cost of merchandise sold the same will increase gross profit on sales
most businesses correct an unacceptable component percentage for gross profit by simply increasing the markup on merchandise purchased for sale because an increased selling price will always increase profit
individual amounts reported on an income statement have little meaning without being compared to another amount
a statement of stockholders equity contains two major sections 1) capital stock and 2) retained earnings
the beginning balance of the capital stock account is the amount of capital stock issued at the beginning of the year
the amounts in the capital stock section of the statement of stockholders equity are obtained from the general ledger account, capital stock
net income is shown on the last line of a statement of stockholders equity
some income may be distributed as dividends to provide stockholders with a return on their investments
data needed to prepare the liabilities section of a balance sheet are obtained from a work sheet
rules double lines across both amount columns below the assets section and below the stockholders equity section show that the assets equal liabilities plus owners equity