Accounting : IS's

Question 1

Accelerated Methods

Answer 1

Depreciation methods that allocate a relatively large portion of the cost of an asset to the early years of the assets useful life

Question 2

Amortization

Answer 2

The process of allocating the cost of intangible long-term assets having a finite useful life to accounting periods; the allocation of the amount of a bond premium or discount to the periods remaining until bond maturity

Question 3

Antidilutive

Answer 3

With reference to a transaction or security, one that would increase earnings per share (EPS) or result in EPS higher than the companies basic EPS- antidilutive securities are not included in the calculation of diluted EPS

Question 4

Available-for-sale

Answer 4

Under GAAP debt securities not classified as either held to maturity or held for trading securities. The investor is willing to sell but not actively planning to sell. In general, available for sale debt securities are reported at fair value on the balance sheet l, with unrealized gains included as a component of other comprehensive income

Question 5

Basic EPS

Answer 5

Net earnings available to common shareholders (ie net income minus preferred dividends by the weighted average number of shares outstanding.

Question 6

Common Shares

Answer 6

A type of security that represents ownership in a company

Question 7

Common Stock

Answer 7

A type of security that represent an ownership interest in a company

Question 8

Comprehensive Income

Answer 8

The change in equity of a business enterprise during a period from non-owner sources; includes all changes in equity during a period except this resulting from investments by owners and distributions to owners; comprehensive income equals net income plus other comprehensive income

Question 9

Depreciation

Answer 9

The process of systematically allocating the cost of long-lived (tangible) assets to the periods during which the assets are expected to provide economic benefits.

Question 10

Diluted EPS

Answer 10

The EPS that would result if all dilutive securities were converted into common shares

Question 11

Diminishing balance method

Answer 11

An accelerated depreciation method ie one that allocated a relatively large proportion of the cost of an asset to the early years of the asset’s useful life

Question 12

Direct write-off method

Answer 12

An approach to recognizing credit losses on customer receivables in which the company waits until such time as customer has defaulted and only then recognized the losses

Question 13

2x declining balance depreciation

Answer 13

An accelerated depreciation method that involves depreciating the asset at double the straight line rate. The rate is multiplied by the book value of the asset at the beginning of the period ( a declining balance) to calculate depreciation expense

Question 14

Earnings per share

Answer 14

The amount of income earned during a period per share of common stock

Question 15

Expenses

Answer 15

Outflows of economic resources or increases in liabilities that result in decreases in equity (other than decreases because of distributions to owners); reductions in net assets associated with creation of revenues

Question 16

FIFO Method

Answer 16

The first in first our method of accounting for inventory which matches sales against cost items of inventory in the order in which they were placed in inventory.

Question 17

Gains

Answer 17

Asset inflows not directly related to the ordinary activities of the business

Question 18

Goodwill

Answer 18

An intangible asset that represents the excess of the purchase price of an acquired company over the value of the net assets acquired

Question 19

Gross margin

Answer 19

Sales minus the the cost of sales (is the cost of goods sold for a manufacturing company)

Question 20

Gross profit

Answer 20

Sales minus the cost of sales (the costs of good sold for a manufacturing company

Question 21

Gross profit margin

Answer 21

The ratio of gross profit to revenues

Question 22

Grouping by function

Answer 22

With reference to the presentation of expenses in an income statement the grouping together of expenses serving the same function, eg all items that are costs of goods sold

Question 23

Grouping by nature

Answer 23

With reference to the presentation of expenses in an income statement, the grouping together of expenses by similar nature eg all depreciation expenses

Question 24

If converted method

Answer 24

A method for accounting for the effect of convertible securities on earnings per share (eps) that specifies what EPS would have been if the convertible securities had been converted at the beginning of the period, taking account of the effects of conversions on net income and weighted average number of shares outstanding.

Question 25

Income

Answer 25

Increases in economic benefits in the form of inflows or enhancements of assets, or decreases of liabilities that result in an increase in equity (other than increase resulting from contributions by owners)

Question 26

Intangible Assets

Answer 26

Assets lacking physical substance, such as patents and trademarks

Question 27

LIFO layer liquidation

Answer 27

With respect to the application of the LIFO inventory method, the liquidation of old, relatively low priced inventory; happens when the volume of sales rises above the volume of recent purchases so that some sales are made from relatively old, low priced inventory

Question 28

LIFO Method

Answer 28

The last in, first out method of accounting for inventory, which matches sales against the costs of items of inventory in the reverse order the items were placed in inventory (ie inventor my produced or acquired last are assumed to be sold first.

Question 29

Long-lives assets

Answer 29

Assets that are expected to provide economic benefits over a future period of time , typically greater than one year.

Question 30

Losses

Answer 30

Asset outflows not directly related to the ordinary activities of the business

Question 31

Matching principle

Answer 31

The accounting principle that expense should be recognized in the same period in which the associated revenue is recognized

Question 32

Multi-step format

Answer 32

With respect to the format of the income statement a format that presents a subtotal for gross profit (revenue minus cost of goods sold).

Question 33

Net Book Value

Answer 33

The remaining (undepreciated) balance of an assets purchase cost for liabilities the face value of a bond minus any unamortized discount or plus any unamortized premium.

Question 34

Net Income

Answer 34

The difference between revenue and expense; what remains after subtracting all expense( including depreciation, interest, and taxes ) from revenue .

Question 35

Net profit margin

Answer 35

An indicator of profitability, calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses.

Question 36

Net revenue

Answer 36

Revenue after adjustments (e.g for estimates returns or for amounts unlikely to be collected)

Question 37

Operating profit

Answer 37

A company’s profits on its usual business activity’s before deducting taxes

Question 38

Operating profit margin

Answer 38

A profitability ratio calculated as operating income (income before interest and taxes) divided by revenue.

Question 39

Ordinary Shares

Answer 39

Equity shares that are subordinate to all other types of equity (e.g. preferred equity)

Question 40

Other comprehensive income

Answer 40

Items of comprehensive income that are not reported on the income statement; comprehensive income minus net income

Question 41

Period costs

Answer 41

Costs that cannot be firefly matched with the timing of revenues and which are thus expensed immediately

Question 42

Pretax margin

Answer 42

A profitability ratio calculated as earnings before taxes divided by revenue

Question 43

Profit margin

Answer 43

An indicator of profitability, calculated as net income divided by revenue; indicates how much of each dollar of revenues is left after all costs and expenses

Question 44

Return on Sales

Answer 44

An indicator of profitability, calculated as net income divided by revenue, indicates how much of each dollar of revenues is left after all costs and expenses

Question 45

Revenue

Answer 45

The amount charged for the deliver of goods/services in the ordinary activities of a business over a stated period; the inflows of economic resources to a company over a stated period.

Question 46

Sales

Answer 46

Revenue; generally understood to refer to the sale of goods; whereas revenues Is understood to include the sale of goods or services

Question 47

Single-step format

Answer 47

With respect to the format of the income statement, a format that does not subtotal for gross profit( income - cogs)

Question 48

Specific identification method

Answer 48

An inventory accounting method that identified which specific inventory items were sold and which remained in inventory to be carried over to later periods

Question 49

Straight-line method

Answer 49

A depreciation method that allocated evenly the cost of a long-lived asset less it’s estimated residual value over the estimates useful life of the asset.

Question 50

Total comprehensive income

Answer 50

The change in equity during a period resulting from transactions and other events, other than changes resulting from transactions with owners in their capacity as owners.

Question 51

trading securities

Answer 51

Under US GAAP a category of debt securities held by a a company with the intent to trade them.

Question 52

Treasury stock method

Answer 52

A method for accounting for the effect of options (and warrants) on earnings per share (EPS that specifies what EPS would have been if the options and warrants had been exercised and the company had used the proceeds to repurchase common stock.

Question 53

Unearned revenue

Answer 53

A liability account for money that has been has been collected for goods or services that have not yet been delivered; a payment received in advance of providing a good/service.

Question 54

Weighted average cost method

Answer 54

An inventory accounting method that averages the total cost of available items over the total units available for sale