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ACC T 2121 > chap 2 (simplified) > Flashcards

chap 2 (simplified) Flashcards

1
Q

What is accounts payable?

A

Amounts owed to suppliers for purchases made on credit.

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2
Q

What is accounts receivable?

A

Amounts owed by customers who purchased products or services on credit.

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3
Q

What is the accrual basis of accounting?

A

Recording transactions in the period they occur, not when cash is received or paid.

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4
Q

What is bank indebtedness?

A

A short-term loan arranged with a bank to cover cash shortfalls.

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5
Q

What is basic earnings per share (EPS)?

A

Income earned by each common share, calculated as income available to shareholders divided by weighted average common shares.

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6
Q

What is a classified statement of financial position?

A

A statement grouping similar assets and liabilities into standard categories.

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7
Q

What is comparability?

A

An enhancing characteristic allowing users to identify similarities and differences in items.

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8
Q

What is the conceptual framework?

A

A system of objectives and fundamentals for consistent accounting standards.

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9
Q

What is a contra asset account?

A

An account reducing another asset account, like accumulated depreciation.

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10
Q

What is the cost constraint?

A

Ensures the value of provided information exceeds its cost.

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11
Q

What are current assets?

A

Assets expected to be converted into cash, sold, or used within one year.

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12
Q

What are current liabilities?

A

Obligations to be paid or settled within one year.

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13
Q

What is the current portion of long-term debt?

A

The part of long-term debt repayable within one year.

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14
Q

What is the current ratio?

A

A liquidity measure: current assets divided by current liabilities.

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15
Q

What is debt to total assets?

A

A solvency measure: total liabilities divided by total assets.

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16
Q

What is deferred revenue?

A

Cash received in advance for services or goods not yet delivered.

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17
Q

What are elements of financial statements?

A

Broad categories like assets, liabilities, equity, income, and expenses for financial presentation.

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18
Q

What is fair value?

A

Estimated price to buy an asset or settle a liability today under normal conditions.

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19
Q

What is the fair value basis of accounting?

A

Assets and liabilities are reported at their fair values.

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20
Q

What is faithful representation?

A

Information that is complete, neutral, and free from material error.

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21
Q

What is the going concern assumption?

A

The assumption that a business will operate for the foreseeable future.

22
Q

What is goodwill?

A

an intangible asset (an asset that’s non-physical but offers long-term value) which arises when another company acquires a new business

23
Q

What is the historical cost basis of accounting?

A

Recording assets and liabilities at their acquisition cost.

24
Q

What are intangible assets?

A

Long-lived assets without physical substance, like patents or trademarks.

25
Q

What is inventory?

A

Goods held for sale to customers.

26
Q

What are liquidity ratios?

A

Measures of a company’s ability to pay short-term obligations, like the current ratio.

27
Q

What are long-term investments?

A

Debt or equity investments held for many years for income or strategic reasons.

28
Q

What are non-current assets?

A

Assets not expected to convert to cash within one year.

29
Q

What are non-current liabilities?

A

Obligations not expected to be settled within one year.

30
Q

What are notes payable?

A

Amounts owed with a written promise to repay, often with interest.

31
Q

What are notes receivable?

A

Amounts owed with a written promise to repay, often with interest.

32
Q

What is the objective of financial reporting?

A

To provide useful financial information for decision-making by investors and creditors.

33
Q

What is the operating cycle?

A

Time to pay for products/services and receive payment from customers.

34
Q

What are prepaid expenses?

A

Costs paid in advance, initially recorded as assets, and expensed when used.

35
Q

What is the price-earnings (P-E) ratio?

A

Market price per share divided by earnings per share, showing investor expectations.

36
Q

What are profitability ratios?

A

Measures of a company’s success, like profit margin and earnings per share.

37
Q

What is property, plant, and equipment?

A

Tangible assets used in operations, like buildings or equipment.

38
Q

What is relevance?

A

Information that influences decision-making with predictive or confirmatory value.

39
Q

What are solvency ratios?

A

Measures of long-term survival, like debt to total assets ratio.

40
Q

What are supplies?

A

Consumable items like office or cleaning supplies.

41
Q

What is timeliness?

A

Information available in time to influence decisions.

42
Q

What are trading investments?

A

Investments held mainly for short-term resale.

43
Q

What is understandability?

A

Information presented clearly for users to easily grasp.

44
Q

What is verifiability?

A

Different users agreeing on information’s faithful representation.

45
Q

What is working capital?

A

Current assets minus current liabilities, showing liquidity.

46
Q

What are the sections of a classified statement of financial position?

A

Assets (current and non-current), liabilities (current and non-current), and shareholders’ equity.

47
Q

How do you calculate liquidity ratios?

A

Current ratio = current assets / current liabilities. Working capital = current assets - current liabilities.

48
Q

How do you calculate solvency ratios?

A

Debt to total assets = total liabilities / total assets.

49
Q

How do you calculate profitability ratios?

A

Basic EPS = income available to shareholders / weighted average shares. P-E ratio = market price per share / EPS.

50
Q

What are the components of the conceptual framework?

A

Objective of reporting, qualitative characteristics, cost constraint, going concern, elements, and measurement bases.

51
Q

What are the qualitative characteristics of financial information?

A

Fundamental: relevance and faithful representation. Enhancing: comparability, verifiability, timeliness, and understandability.

52
Q

What are the measurement bases of financial statements?

A

Historical cost and fair value.

ACC T 2121 (4 decks)

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