31 terms

Accounting Key Words Test 2

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board of directors
elected by the shareholders to represent their interests; its audit committee is responsible for maintaining the integrity of a company's financial reports
corporate governance
procedures designed to ensure that the company is managed in the interests of the shareholders
cost-effectiveness
benefits of accounting for and reporting information outweigh the costs
earnings forcasts
predictions of earnings for future accounting periods, prepared by financial analysts
FASB
financial accounting standards board, makes Generally Accepted Accounting Principles
institutional investors
managers of pension, mutual, endowment and other funds that invest on the behalf of others
lenders/creditors
suppliers and financial institutions that lend money to companies
material amounts
amounts that are large enough to influence a user's decision
press release
written public announcement distributed to major news services
private investors
individuals who purchase shares in companies
PCAOB
public company accounting oversight board, came as a result of the Sarbanes-Oxley Act, body given the responsibility to work out detailed auditing standards
Sarbanes-Oxley Act
law that strengthens US financial reporting and corporate governance regulations
SEC
securities and exchange commission, US agency that determines financial statements that public companies must provide stockholders and the measurement rules that they must use in producing those statements
unqualified audit opinion
auditor's statement that the financial statements are fair presentations in all material respects in conformity with GAAP
accounts receivable
also known as trade receivables or receivables, open accounts owed to the business by trade customers
aging of accounts receivable method
estimates uncollectible accounts based on the age of each account receivable
allowance method
bases bad debt expense on an estimate of uncollectible accounts
bad debt expense
expense associated with estimated uncollectible accounts receivable
bank reconciliation
verifies the accuracy of the bank statement and cash accounts of a company
bank statement
monthly report from a bank that shows deposits recorded, checks cleared, other debits and credits, and a running bank balance
percentage of credit sales method
bases bad debt expense on the historical percentage of credit sales that result in bad debts
average cost method
uses the weighted average unit cost of the goods available for sale for both cost of goods sold and ending inventory
direct labor
earnings of employees who work directly on the products being manufactured
factory overhead
manufacturing costs that are not raw material or labor costs
finished goods inventory
manufactured goods that are complete and ready for sale
lower of cost or market
valuation method departing from the cost principle; it serves to recognize a loss when replacement cost or net realizable value drops below cost
acquisition cost
net cash equivalent amount paid or to be paid for an asset
amortization
systematic and rational allocation of the acquisition cost of an intangible asset over its useful life
capitalized interest
interest expenditures included in the cost of a self-constructed asset
depletion
systematic and rational allocation of the cost of a natural resource over the period of its exploitation
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