Chapter 4 Flashcards
A ___ places each asset and each liability into a specific category.
classified balance sheet
Assets are shown in order of liquidity.
Liabilities are classified as current (due within one year) or long term (due after one year).
____ measures how quickly and easily an account can be converted to cash.
liquidity
The time span when:
Cash is used to acquire goods and services.
These goods and services are sold to customers.
The business collects cash from customers
operating cycle
all the assets that will not be converted to cash or used up within the business’s operating cycle or one year, whichever is greater.
Long-term assets
investments in bonds or stocks that the company intends to hold for longer than one year.
Long-term Investments
long-lived, tangible assets, used in the operation of a business.
Property, Plant, and Equipment
assets with no physical form that are valuable because of the special rights carried.
Intangible Assets
must be paid either with cash or with goods and services within one year or within the entity’s operating cycle.
Current liabilities
Examples:
Accounts Payable
Salaries Payable
Unearned Revenue
liabilities that do not need to be paid within one year or within the operating cycle.
Long-term liabilities
The___ zeroes out all revenue and expense accounts in order to measure each period’s net income separately from all other periods.
closing process
___ relate to a particular accounting period and are closed at the end of that period
Temporary accounts
Revenues, Expenses, Income Summary, and Dividends accounts.
____ are not closed at the end of the period
Permanent accounts
Asset, Liability, Common Stock, and Retained Earnings accounts.
____ transfer revenues, expenses, and Dividends to Retained Earnings.
Closing entries
____ is a temporary account that summarizes the net income (or net loss) for the period.
Income Summary
_____ is the process by which companies produce their financial statements for a specific period.
accounting cycle
