Accounting 211 Exam 3 Flashcards
Return on Assets
Income divided by assets invested
Examples of source documents
Sales receipts, checks, purchase orders, bills from suppliers, payroll records, and bank statements
Accrued Expense
Expenses earned in a period that are both unrecorded and not yet received in cash (or other assets)
Accrued Revenue
Revenues earned in a period that are both unrecorded and not yet received in cash (or other assets)
Gross Method
Record full amount
Perpetual Method
Records both the entries for COGS/Merch and Sales/Cash
Net Method
Records net amount, i.e. subtracting the discount
Periodic Method
Records the entries for Sales/Cash and later records COGS/Merch at the end of the period
How do you reimburse the Petty Cash Fund
Credit all the purchases made on with the petty cash fund and credit cash DO NOT TOUCH PETTY CASH
Effective Cash Management Priniciples
Encourage collection of receivables; delay payment of liabilities; keep only necessary assets; plan expenditures; invest excess cash
How do you establish the Petty Cash Fund
Debit petty cash and credit cash
How to find interest
Amount owed times the interest times the days/360
Allowance method of accounting for uncollectible accounts
Estimate loss from uncollectible accounts
Maker for Notes
The one who signed the note and promised to pay it
Payee for Notes
The person to whom the note is payable
Accounts Receivable Turnover
Net sales divided by average accounts receivable, new
Materiality Constraint
Permits the use of the direct write-off method when its results are similar to using the allowance method
Dishonoring a note
When a note is not paid at the maturity date
How to calculate depreciation (double declining)
100% divided by useful life; 2 times that percent; then that percent times the beginning-period book value
Modified Accelerated Cost Recovery System (MACRS)
Allows straight-line depreciation for some assets but requires accelerated depreciation for most kinds of assets
Total Asset Turnover
Net sales divided by average total assets
Revenue Expenditures
Ordinary repairs
Times Interest Earned Ratio
Income before interest expense and income taxes divided by interest expense
Current Liabilties
Due within one year or the company’s operating cycle if longer
Contingent Liabilities
Potential obligation that depends on a future event arising from past transaction or event
Short Term Notes Payable
A written promise to pay within one year
Uncertainty in Liabilities
Whom, when, and how much to pay
