Ch. 4 Flashcards

1
Q

A balance sheet that places each asset and each liability into a specific category.

A

Classified balance sheet

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2
Q

A measure of how quickly an item can be converted to cash

A

Liquidity

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3
Q

An asset that is expected to be converted to cash, sold, or used up in the next 12 months or normal business cycle

A

current asset

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4
Q

The time span during which cash is paid for goods and services and then are sold to customers for cash

A

operating cycle

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5
Q

Investments in bonds of stocks in which the company intends to hold on to longer than 1 year

A

long term investments

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6
Q

Also called fixed assets, long-lived tangibles such as buildings, land, equipment

A

Property, plant, equipment

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7
Q

An asset with no physical form that is valuable because the special rights it caries

A

intangible asset

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8
Q

A liability that must be paid with cash, or with goods and services within one year of within the entity’s operating cycle if longer than one year

A

current liability

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9
Q

A liability that does not need to be paid within one year of within the entity’s operating cycle, which ever is longer

A

long term liability

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10
Q

A step in the accounting cycle that occurs at the end of the period. Consist of journalizing and posting closing entries to set the balances of rev, exp, income summary, and dividends to zero.

A

Closing process

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11
Q

An account that relates to a particular accounting period and is closed at the end of that period. Name the accounts in this category

A

Temporary accounts.
Rev, exp, income summary, and dividends

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12
Q

An account that is not closed at the end of the period. Name the accounts that fit in this category

A

Permanent accounts.
Assets, liabilities, common stock, and retained earnings accounts.

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13
Q

Entries that transfer the revenues, expenses, and dividends balances to the retained earnings account to prepare for the next cycle

A

Closing entries

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14
Q

A temporary account into which revenues and expenses are transferred prior to their final transfer into the retained earnings account.

A

Income summary

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15
Q

What are the four steps to closing temporary accounts, assume positive revenue

A
  1. Make Rev equal zero by moving them to the credit side of the income summary account (if there is positive revenue)
  2. Make expense accounts equal zero by moving them to the debit side of the income summary
  3. Make income summary equal zero by transferring net income/loss to retained earnings.
  4. Transfer dividends to the debit side of retained earnings.
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16
Q

A list of the accounts and their balances at the end of the period after journalizing and posting at the closing entries. Includes only permanent accounts

A

post-closing trial balance

17
Q

Name all 9 steps of the accounting cycle

A
  1. start with beginning account balances
  2. Analyze and journalize transactions in the journal
  3. Post journal entries to the ledger
  4. Prepare unadjusted trial balance
  5. Journalize and post adjusting entries
  6. Prepare adjusted trial balance
  7. Prepare the financial statements
  8. Journalize and post closing entries
  9. Prepare the post closing trial balance
18
Q

Measures the company’s ability to pay current liabilities from current assets. State the name and formula

A

Current ration = total current assets/total current liabilities