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Question 1

account format

Answer 1

A balance-sheet format that lists assets on the left and liabilities and stockholders__ equity on the right.

Question 2

accrual

Answer 2

An expense or a revenue that occurs before the business pays or receives cash. An accrual is the opposite of a deferral.

Question 3

accrual accounting

Answer 3

Accounting that records the impact of a business event as it occurs regardless of whether the transaction affected cash.

Question 4

accrued expense

Answer 4

An expense incurred but not yet paid in cash.

Question 5

accrued revenue

Answer 5

A revenue that has been earned but not yet received in cash.

Question 6

accumulated depreciation

Answer 6

The cumulative sum of all depreciation expense from the date of acquiring a plant asset.

Question 7

adjusted trial balance

Answer 7

A list of all the ledger accounts with their adjusted balances.

Question 8

book value (of a plant asset)

Answer 8

The asset__s cost minus accumulated depreciation.

Question 9

cash-basis accounting

Answer 9

Accounting that records only transactions in which cash is received or paid.

Question 10

classified balance sheet

Answer 10

A balance sheet that shows current assets separate from long-term assets and current liabilities separate from long-term liabilities.

Question 11

closing the books

Answer 11

The process of preparing the accounts to begin recording the next period__s transactions. Closing the accounts consists of journalizing and posting the closing entries to set the balances of the revenue expense and dividendsaccounts to zero. Also called closing the accounts.

Question 12

closing entries

Answer 12

Entries that transfer the revenue- expense- and dividends balances from these respective accounts to the Retained Earnings account.

Question 13

contra account

Answer 13

An account that always has a companion account and whose normal balance is opposite that of the companion account.

Question 14

current asset

Answer 14

An asset that is expected to be converted to cash- sold- or consumed during the next 12 months or within the business__s normal operating cycle if longer than a year.

Question 15

current liability

Answer 15

A debt due to be paid within one year or within the entity__s operating cycle if the cycle is longer than a year.

Question 16

current ratio

Answer 16

Current assets divided by current liabilities. Measures a company__s ability to pay current liabilities with current assets.

Question 17

debt ratio

Answer 17

Ratio of total liabilities to total assets. States the proportion of a company__s assets that is financed with debt.

Question 18

deferral

Answer 18

An adjustment for which the business paid or received cash in advance. Examples include prepaid rent prepaid insurance and supplies

Question 19

depreciation

Answer 19

Allocation of the cost of a plant asset to expense over its useful life.

Question 20

expense recognition principle

Answer 20

The basis for recording expenses. Directs accountants to identify all expenses incurred during the period to measure the expenses and to match them against the revenues earned during that same period.

Question 21

liquidity

Answer 21

Measure of how quickly an item can be converted to cash.

Question 22

long-term asset

Answer 22

An asset that is not a current asset.

Question 23

long-term liability

Answer 23

A liability that is not a current liability.

Question 24

multi-step income statement

Answer 24

An income statement that contains subtotals to highlight important relationships between revenues and expenses.

Question 25

net working capital

Answer 25

A measure of liquidity; Current assets__current liabilities.

Question 26

operating cycle

Answer 26

Time span during which cash is paid for goods and services that are sold to customers who pay the business in cash.

Question 27

permanent accounts

Answer 27

Asset liability and stockholders__ equity accounts that are not closed at the end of the period.

Question 28

plant assets

Answer 28

Long-lived assets- such as land- buildings- and equipment- used in the operation of the business. Also called fixed assets.

Question 29

prepaid expense

Answer 29

A category of miscellaneous assets that typically expire or get used up in the near future. Examples include prepaid rent- prepaid insurance- and supplies.

Question 30

report format

Answer 30

followed by liabilities and stockholders__ equity below.

Question 31

revenue principle

Answer 31

The basis for recording revenues; tells accountants when to record revenue and the amount of revenue to record.

Question 32

single-step income statement

Answer 32

An income statement that lists all the revenues together under a heading such as Revenues or Revenues and Gains. Expenses appear in a separate category called Expenses or perhaps Expenses and Losses.

Question 33

temporary accounts

Answer 33

The revenue and expense accounts that relate to a limited period and are closed at the end of the period are temporary accounts. For a corporation- the Dividends account is also temporary.

Question 34

time-period concept

Answer 34

Ensures that accounting information is reported at regular intervals.

Question 35

unearned revenue

Answer 35

A liability created when a business collects cash from customers in advance of earning the revenue. The obligation is to provide a product or a service in the future.