Chapter 3 Flashcards
what are examples of activities to not be recorded?
signing a lease, taking customer order, hiring new employee **no economic impact as of yet
why is the sale of shares not recorded as a revenue?
-financing activity not operating
why are dividends not an expense?
-financing activity not operating
warranty is a ___
provision: probable firm will have to replace product
is there is less than a 50% chance of an issue, it is a ___
contingency
which are the only SHE accounts with a debit balance?
expenses and dividends
what are the 3 purposes of the general journal
- discloses effects of transaction in one place
- chronological order
- detects errors
the ____ ____ us a grouping of all accounts with balances in order of the balance sheet
general ledger
the listing of the general ledger with a number is the….
chart of accounts
___ is when you transfer journal entries recorded in the general journal to the general ledger
posting
which accounts will not have an opening balance?
retained earnings, expense, dividends
describe the trial balance
- lists all accounts in ledger in order of balance sheet
- Dr and Cr column
- unofficial statement
describe earnings per share (EPS)
- measures profit earned on each common share
- helps shareholders determine investment return
- reported only for common shares
why is there no industry average for earnings per share?
there is a wide variation in the number of shares issued and different levels of debt and equity between companies
describe the price-earning ratio
- measures ratio of stock market price of each common hare to its earnings per share
- profitability ratio
- higher if investors think current profit levels will increaser, lower if investors think profit will decline
