Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial Accounting > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

Ratio used to assess a company’s ability to settle its current debts with its most liquid assets; defined as quick assets (cash, short-term investments, and current receivables) divided by current liabilities.

A

ACID-TEST RATIO

quick assets / current liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Reduction in the price of merchandise granted by a seller to a buyer when payment is made within the discount period.

A

CASH DISCOUNT

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Cost of inventory sold to customers during a period; also called COST of SALES

A

COST OF GOODS SOLD

    beginning inventory
\+  cost of goods purchased
=   goods available for sale
-    ending inventory
=   cost of goods sold
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Notification that the sender has credited the recipient’s account in the sender’s records.

A

CREDIT MEMORADUM

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Time period that can pass before a customer’s payment is due.

A

CREDIT PERIOD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Description of the amounts and timing of payments that a buyer (debtor) agrees to make in the future.

A

CREDIT TERMS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Notification that the sender has debited the recipient’s account in the sender’s records.

A

DEBIT MEMORANDUM

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Time period in which a cash discount is available and the buyer can make a reduced payment.

A

DISCOUNT PERIOD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Abbreviation used to describe credit terms and transactions.

A

EOM (END OF the MONTH)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Abbreviation describing the point when ownership of goods passes to the buyer.

A

FOB (FREE ON BOARD)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Expenses that support the operating activities of a business.

A

GENERAL & ADMINISTRATIVE EXPENSES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Net sales minus costs of goods sold; also called GROSS PROFIT.

A

GROSS MARGIN

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Gross margin (net sales minus costs of goods sold) divided by net sales; also called GROSS PROFIT RATIO.

A

GROSS MARGIN RATIO

gross margin / net sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Another name for GROSS MARGIN.

A

GROSS PROFIT

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Goods a company owns and expects to sell in its normal operations.

A

INVENTORY

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Catalog (full) price of an item before any trade discount is deducted.

A

LIST PRICE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Goods that a company owns and expects to sell to customers.

A

MERCHANDISE or MERCHANDISE INVENTORY

beginning inventory
+ net purchases
= merchandise for sale

ending inventory
+ cogs
= merchandise for sale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Entity that earns net income bu buying and selling merchandise.

A

MERCHANDISER

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Income statement format that shows subtotals between sales and net income, categorizes expenses, and often reports the details of net sales & expenses.

A

MULTIPLE-STEP INCOME STATEMENT

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Method that records the cost of inventory purchased but does not continuously track the quantity available or sold to customers; records are updated at the end of each period to reflect the physical count and costs of goods available.

A

PERIODIC INVENTORY SYSTEM

21
Q

Method that maintains continuous records of the cost of inventory available and the cost of goods sold.

A

PERPETUAL INVENTORY SYSTEM

22
Q

Term used by a purchaser to describe a cash discount granted to the purchaser for paying within the discount period.

A

PURCHASE DISCOUNT

23
Q

Intermediary that buys products from manufacturers or wholesalers and sells them to consumers.

A

RETAILER

24
Q

Term used by a seller to describe a cash discount granted to buyers who pay within the discount period.

A

SALES DISCOUNT

25
Q

Expenses of promoting sales, such as displaying and advertising merchandise, making sales, and delivering goods to customers.

A

SELLING EXPENSES

26
Q

Inventory losses that occur as a result of theft or deterioration.

A

SHRINKAGE

27
Q

Income statement format that includes cost of goods sold as an expense and shows only one subtotal for total expenses.

A

SINGLE-STEP INCOME STATEMENT

28
Q

Information outside the usual accounting records.

A

SUPPLEMENTARY RECORDS or SUPPLEMENTAL RECORDS

29
Q

Reduction from a list or catalog price that can vary for wholesalers, retailers, and consumers.

A

TRADE DISCOUNT

30
Q

Intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers.

A

WHOLESALER

31
Q

The buyer pays shipping costs and accepts ownership of goods when the seller transfers goods to the carrier.

A

FOB SHIPPING POINT (or FACTORY)

32
Q

The seller pays shipping costs and buyer accepts ownership of goods at the buyer’s place of business.

A

FOB DESTINATION

33
Q

What transaction shows the purchase of merchandise for resale?

A

MERCHANDISE INV. Dr

CASH or A/P Cr

34
Q

What transaction shows paying freight costs on purchases (FOB shipping point)?

A

MERCHANDISE INV. Dr

CASH Cr

35
Q

What transaction shows paying for purchased merchandise within a discount period?

A

A/P Dr
CASH Cr
MERCH. INV. Cr

36
Q

What transaction shows recording of purchase returns or allowances?

A

CASH or A/P Dr

MERCH. INV. Cr

37
Q

What transaction shows the sale or merchandise?

A

A/R or CASH Dr
SALES Cr

COST of GOODS SOLD Dr
MERCH. INV. Cr

38
Q

What transaction shows the receipt of payment within a discount period?

A

CASH Dr
SALES DISCOUNTS Dr
A/R Cr

39
Q

What transaction shows granting sales returns or allowances?

A

SALES RETURNS & ALLOWANCES Dr
CASH or A/R Cr

MERCHANDISE INVENTORY Dr
COST OF GOODS SOLD Cr

40
Q

What transaction shows paying freight on sales (FOB destination)?

A

DELIVERY EXPENSE Dr

CASH Cr

41
Q

What adjustment shows shrinkage (which only occurs when the recorded amount is larger than the physical inventory)?

A

COST OF GOODS SOLD Dr

MERCH. INV. Cr

42
Q

What entry closes temporary accounts with credit balances?

A

SALES Dr

INVENTORY SUMMARY Cr

43
Q

What entry closes temporary accounts with debit balances?

A

INVENTORY SUMMARY Dr
SALES RETURNS & ALLOWANCES Cr
SALES DISCOUNTS Cr
COST OF GOODS SOLD Cr
DELIVERY EXPENSE Cr
OTHER EXPENSE Cr

44
Q

How is net income calculated for a merchandiser?

A 
NET SALES
-  COST OF GOODS SOLD
=  GROSS PROFIT
-   EXPENSES
=  NET INCOME
45
Q

How is net income calculated for a service provider?

A

REVENUES
- EXPENSES
= NET INCOME

46
Q

How is NET SALES calculated?

A

SALES
- SALES DISCOUNTS
- SALES RETURNS & ALLOWANCES
= NET SALES

46
Q

How is GROSS PROFIT or GROSS MARGIN calculated?

A

NET SALES
- COGS
= GROSS PROFIT or GROSS MARGIN

46
Q

How is INCOME FROM OPERATIONS calculated?

A

GROSS PROFIT
- TOTAL OPERATING EXPENSES
= INCOME FROM OPERATIONS

47
Q

How is the CURRENT RATIO calculated?

A

current assets / current liabilities

Financial Accounting (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions