Accounting : IS's Flashcards
Accelerated Methods
Depreciation methods that allocate a relatively large portion of the cost of an asset to the early years of the assets useful life
Amortization
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
Antidilutive
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
Available-for-sale
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
Basic EPS
Net earnings available to common shareholders (ie net income minus preferred dividends by the weighted average number of shares outstanding.
Common Shares
A type of security that represents ownership in a company
Common Stock
A type of security that represent an ownership interest in a company
Comprehensive Income
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
Depreciation
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.
Diluted EPS
The EPS that would result if all dilutive securities were converted into common shares
Diminishing balance method
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
Direct write-off method
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
2x declining balance depreciation
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
Earnings per share
The amount of income earned during a period per share of common stock
Expenses
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
FIFO Method
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.
Gains
Asset inflows not directly related to the ordinary activities of the business
Goodwill
An intangible asset that represents the excess of the purchase price of an acquired company over the value of the net assets acquired
Gross margin
Sales minus the the cost of sales (is the cost of goods sold for a manufacturing company)
Gross profit
Sales minus the cost of sales (the costs of good sold for a manufacturing company
Gross profit margin
The ratio of gross profit to revenues
Grouping by function
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
Grouping by nature
With reference to the presentation of expenses in an income statement, the grouping together of expenses by similar nature eg all depreciation expenses
If converted method
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.
Income
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)
Intangible Assets
Assets lacking physical substance, such as patents and trademarks
LIFO layer liquidation
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
LIFO Method
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.
Long-lives assets
Assets that are expected to provide economic benefits over a future period of time , typically greater than one year.
Losses
Asset outflows not directly related to the ordinary activities of the business
Matching principle
The accounting principle that expense should be recognized in the same period in which the associated revenue is recognized
Multi-step format
With respect to the format of the income statement a format that presents a subtotal for gross profit (revenue minus cost of goods sold).
Net Book Value
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.
Net Income
The difference between revenue and expense; what remains after subtracting all expense( including depreciation, interest, and taxes ) from revenue .
Net profit margin
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.
Net revenue
Revenue after adjustments (e.g for estimates returns or for amounts unlikely to be collected)
Operating profit
A company’s profits on its usual business activity’s before deducting taxes
Operating profit margin
A profitability ratio calculated as operating income (income before interest and taxes) divided by revenue.
Ordinary Shares
Equity shares that are subordinate to all other types of equity (e.g. preferred equity)
Other comprehensive income
Items of comprehensive income that are not reported on the income statement; comprehensive income minus net income
Period costs
Costs that cannot be firefly matched with the timing of revenues and which are thus expensed immediately
Pretax margin
A profitability ratio calculated as earnings before taxes divided by revenue
Profit margin
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
Return on Sales
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
Revenue
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.
Sales
Revenue; generally understood to refer to the sale of goods; whereas revenues Is understood to include the sale of goods or services
Single-step format
With respect to the format of the income statement, a format that does not subtotal for gross profit( income - cogs)
Specific identification method
An inventory accounting method that identified which specific inventory items were sold and which remained in inventory to be carried over to later periods
Straight-line method
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.
Total comprehensive income
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.
trading securities
Under US GAAP a category of debt securities held by a a company with the intent to trade them.
Treasury stock method
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.
Unearned revenue
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.
Weighted average cost method
An inventory accounting method that averages the total cost of available items over the total units available for sale
