Ch 13 - Financials and Closing VOCAB Flashcards

1
Q

What is a classified financial statement?

A

format by which revenues and expenses on income statement, and assets and liabilities on balance sheet, are divided into groups of similar accounts and subtotal is given for each group

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2
Q

Define current assets.

A

Assets consisting of cash, items that normally will be converted to cash within one year, or items that will be used up within one year.

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3
Q

Define current liabilities.

A

debts that must be paid within one year.

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4
Q

Define current ratio.

A

relationship between current assets and current liabilities that provides a measure of a firm’s ability to pay its current debts
(current ratio = current assets / current liabilities)

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5
Q

Define gross profit.

A

difference between net sales and cost of goods sold

gross profit = net sales - cost of goods sold

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6
Q

Define gross profit percentage.

A

amount of gross profit from each dollar of sales

gross profit percentage = gross profit / net sales

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7
Q

Define inventory turnover.

A

number of times inventory is purchased and sold during the accounting period
(inventory turnover = cost of goods sold / average inventory)

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8
Q

Define liquidity.

A

Ease with which an item can be converted into cash

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9
Q

Define long-term liabilities.

A

debts of a business that are due more than one year in the future.

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10
Q

Define multiple-step income statement.

A

type of income statement on which several subtotals are computed before the net income is calculated

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11
Q

Define plant and equipment.

A

property that will be used in the business for longer than one year.

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12
Q

Define reversing entries.

A

Journal entries made to reverse the effect of certain adjusting entries involving accrued income or accrued expenses to avoid problems in recording future payments or receipts of cash in a new accounting period

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13
Q

Define single-step income statement

A

type of income statement where only one computation is needed to determine the net income
(total revenue - total expenses = net income)

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14
Q

Define working capital.

A

different between current assets and current liabilities.

it is a measure of firm’s ability to pay current obligations.

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