Accounting Chapter 2 Flashcards
Consistency
Use of the same accounting principles and methods from year to year within a company.
Classified Balance Sheet
A balance sheet that groups together similar assets and similar liabilities, using a number of standard classifications and sections.
Current Assets
Assets that companies expect to convert to cash or use up within one year of the operating cycle, whichever is longer.
Current Liabilities
Obligations that a company expects to pay within the next year or operating cycle, whichever is longer.
Earning per share (EPS)
A measure of the net income earned on each share of common stock; computed as net income minus preferred dividends divided by the average number of common shares outstanding during the year.
Financial Accounting Standards Board (FASB)
The primary accounting standard-setting body in the United States.
Free cash flow
Net cash provided by operating activities after adjusting for capital expenditures and cash dividends paid.
Intangible assets
Assets that do not have physical substance
International Accounting Standards Board (IASB)
An accounting standard-setting that issues standards adopted by many countries outside of the United States.
International Financial Reporting Standards (IFRS)
Accounting standards, issued by the IASB, that have been adopted by many countries of the United States.
Long-term Investments
Generally, (1) investments in stocks and bonds of other corporations that companies hold for more than one year; (2) long-term assets, such as land and buildings, not currently being used in the company’s operations; and (3) long-term notes receivable.
Long-term liabilities (long-term debt)
Obligations that a company expects to pay after one year.
Operating cycle
The average time required to purchase inventory, sell it on account, and then collect cash from customers - that is- go from cash to cash.
Profitability rations
Measures of the operating success of a company for a given period of time.
Property, plant, and equipment.
Assets with relatively long useful loves that are currently used in operating the business.
Public Company Accounting Oversight Board (PCAOB)
The group charged with determining auditing standards and reviewing the performance of auditing firms.
Ratio
An expression of the mathematical relationship between one quantity and another.
Ratio Analysis
A technique that expresses the relationship among selected items of financial statement data.
Securities and Exchange Commission (SEC)
The agency of the U.S. government that oversees U.S. financial markets and accounting standard-setting bodies.
Solvency Ratios
Measures of the ability of the company to survive over a long period of time.
Statement of stockholder’s equity
A financial statement that presents the causes of changes to a stockholder’s equity during the period, including those that caused retained earnings to change.
Verifiable
The quality of information that occurs when independent observers, using the same methods, obtain similar results.
A classified balance sheet helps users evaluate:
the company’s ability to pay its debt and the claims of short-term creditors.
A classified balance sheet generally contains the following standard classifications:
Current Assets Long-term Investments Property, Plant, and Equipment Intangible Assets Current Liabilities Long-term Liabilities Stockholder's Equity