Acct 351 Chapter 05 Flashcards
Accounting Policies
explanations of the valuation methods that are used or the basic assumptions that are made for inventory valuations, amortization methods, investments in subsidiaries, etc
activity ratios
Ratios that measure how effectively a company uses its assets, and the liquidity of certain assets such as inventory and receivables
Additional Detail
expanded details on specific balance sheet line items
adjunct account
An account that increases either an asset, a liability, or an owners’ equity account
Assets
Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events
balance sheet
A financial statement, otherwise known as the statement of financial position, that shows an enterprise’s financial condition at the end of a period
cash and cash equivalents
Cash, demand deposits, and short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value
cash debt coverage ratio
A long-run measure of financial flexibility that indicates a company’s ability to repay its liabilities from net cash provided by operating activities, without having to liquidate the assets employed in its operations
Contingencies
material events that have an uncertain outcome
contingency
Defined in the CICA Handbook as “an existing condition or situation involving uncertainty as to a possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur”.
contra account
An account on the balance sheet that reduces either an asset, a liability, or an owners’ equity account
Contractual Situations
explanations of certain restrictions or covenants that are attached to specific assets or, more likely, to liabilities
coverage ratios
Ratios that measure the degree of protection for long-term creditors and investors.
Current assets
Cash and other assets ordinarily realizable within one year from the date of the balance sheet or within the normal operating cycle where that is longer than a year.
current cash debt coverage ratio
The ratio of net cash provided by operating activities to average current liabilities, indicating how well a company can address its current obligations from internally generated cash flow
Current liabilities
Amounts payable within one year from the date of the balance sheet or within the normal operating cycle where this is longer than a year
Equity/Net Assets
The residual interest in the assets of an entity that remains after deducting its liabilities
financial flexibility
The measurement of the ability of an enterprise to take effective actions to alter the amounts and timing of cash flows so it can respond to unexpected needs and opportunities
Financial instruments
These are contracts that give rise to both a financial asset of one party and a financial liability or equity instrument of another
Financing activities
Activities resulting in changes in the size and composition of the enterprise’s equity capital and borrowings
free cash flow
This is an indicator of financial flexibility that uses information provided on the cash flow statement. Free cash flow is net operating cash flows reduced by the capital expenditures needed to sustain the current level of operations
Future income tax assets
The future tax consequence due to deductible temporary differences
Future income tax liabilities
The future tax consequences associated with taxable temporary differences.