Ch. 4 Completing the Accounting Cycle Flashcards
A list of permanent accounts and their balances after a company has journalized and posted closing entries.
Post-closing trial balance
The average time that it takes to purchase inventory, sell it on account, and then collect cash from customers.
Operating cycle
Entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders equity account, retained earnings.
Closing entries
Obligations that a company expects to pay after one year.
Long-term liabilities
A balance sheet that contains standard classifications or sections
Classified balance sheet
A multiple-column form that may be used in making adjustments and in preparing financial statements.
Worksheet
The ownership claim of shareholders on total assets. It is to a corporation hz owners equity is to a proprietorship.
Stockholders’ equity
Entries to correct errors made in recording transactions.
Correcting entries
Accounts that relate to one or more future accounting periods. Consist of all balance sheet accounts. Balances are carried forward to the next accounting period.Consist of assets, liabilities, common stock and retained earnings
Permanent (real) accounts
Generally, (1) investments in stocks and bonds of other companies that are normally held for many years; (2) long-term assets, such as land and buildings, not currently being used in operating activities; and (3) long-term notes receivable.
Long-term investments
Obligations that a company expects to pay within the coming year or it’s operating cycle, whichever is longer.
Current liabilities
A temporary account used in closing revenue and expense accounts
Income summary
Assets with relatively long useful lives that are currently being used in operations.
Property, plant, and equipment
Accounts that relate only to a given accounting period. Consist of revenues, expenses, the dividend account, and the income summary account. All temporary account are closed at the end of the accounting period.
Temporary (nominal) accounts
Assets that a company expects to convert to cash or use up within one year of its operating cycle, which ever is longer
Current assets
Long-lived Assets that do not have a physical substance
Intangible assets
An entry, made at the beginning of next accounting period That is the exact opposite of the adjusting entry made in the previous period.
Reversing entry
The ability of a company to pay obligations expected to be due within the next year.
Liquidity
Non-interest-bearing liabilities that arise from the operating activities of the business, as well as interest bearing note payable that have a maturity date of one year or less from the balance sheet date. Any other liabilities that must be paid within the upcoming financial period.
Current liabilities
Those deaths that are payable over a comparatively long period, Usually more than one year. Generally, any debt that is not due within the next year is classified in this category. Ordinarily, mortgage payable and bonds payable or the count in this category for a corporation.
Long-term liabilities
Revenues minus expenses = net income
Income statement
Shows the effect of current. Transactions on retain earnings. It explains how retain earnings changed over a period of time
Statement of retained earnings
Reports the financial condition of a company at a precise moment in time
Balance sheet
Shows the companies sources and uses of cash during the period
Statement of cash flow’s
Temporary accounts
R E D
Revenues Expenses Dividends
Steps in closing process:
1) Close revenues to the income summary account
2) Close expenses to the income summary account.
3) Close the income summary account to retained earnings
4) Close dividends to retained earnings
