Chapter 4 Terms Flashcards
Classified Balance Sheet
A balance sheet that contains standard classifications or sections
Closing Entries
Entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent owner’s equity account, Owner’s Capital
Correcting Entries
Entries to correct errors made in recording transactions
Current Assets
Assets that a company expects to convert to cash or use up within one year or its operating cycle, whichever is longer
Current Liabilities
Obligations that a company expects to pay within the coming year or its operating cycle, whichever is longer
Income Summary
A temporary account used in closing revenue and expense accounts
Intangible Assets
Long-lived assets that do not have physical substance
Liquidity
The ability of a company to pay obligations expected to be due within the next year
Long-term Investments
Generally, (1) investments in stocks and bonds of other companies that are normally held for many years; (2) long-term assets, such as land and buildings, not currently being used in operating activities; and (3) long-term notes receivable
Long-term Liabilities
Obligations that company expects to pay after one year
Operating Cycle
The average time that it takes to purchase inventory, sell it on account, and then collect cash from customers
Permanent (Real) Accounts
Accounts that relate to one or more future accounting periods. Consist of all balance sheet accounts. Balances are carried forward to the next accounting period
Post-Closing Trial Balance
A list of permanent accounts and their balances after a company has journalized and posted closing entries
Property, Plant, and Equipment
Assets with relatively long useful lives that are currently being used in operations
Reversing Entry
An entry, made at the beginning of the next accounting period, that is the exact opposite of the adjusting entry made in the previous period
