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Financial accounting > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

financing activities are?

A

financing the company, issuing stock, raising debt or equity funds

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2
Q

liability?

A

the obligation of a business

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3
Q

creditor?

A

someone who a company owes a debt

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4
Q

revenue?

A

the inflow of assets resulting from the sale of goods or services

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5
Q

asset?

A

something you own that has a future economic benefit

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6
Q

expense?

A

an outflow of assets resulting from the sale of goods or services

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7
Q

what is the accounting equation?

A

assets = liabilities + owner’s equity

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8
Q

owners equity?

A

the owner’s claim on the assets of an entity

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9
Q

retained earnings?

A

the owners’ claims to the companies assets that result from its earnings that have not been paid out in dividends,

(the part of the shareholder’s equity that represents the income earned - dividends paid over the life of an entity)

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10
Q

balance sheet?

A

statement of position, summarizes the assets, liabilities, and owners’ equity at a specific point in time

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11
Q

income statement?

A

statement of performance, summarizes the revenues and expenses

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12
Q

net income?

A

revenues - expenses

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13
Q

statement of retained earnings?

A

summarizes the income earned and dividends paid over the life of a business

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14
Q

statement of cash flows?

A

summarizes a company’s cash receipts and cash payments during the period from operating, investing, and financing activities, (tracks what happened to the cash)

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15
Q

current assets?

A

assets that are expected to be realized in cash or sold or consumed in a year or one operating cycle(whichever is longer)

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16
Q

current liability?

A

an obligation that will be satisfied within the next operating cycle or within one year

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17
Q

liquidity?

A

the ability of a company to pay its debts as they come due

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18
Q

working capital?

A

current assets - current liabilities

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19
Q

current ratio?

A

current assets/current liabilities

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20
Q

gross profit formula?

A

sales - the cost of goods sold

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21
Q

profit margin?

A

net income / sales

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22
Q

chart of accounts?

A

a numerical list of all accounts used by a company

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23
Q

general ledger?

A

a device containing all of the accounts

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24
Q

trial balance?

A

a list of each account and its balance

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25
Q

accrued revenue?

A

when a company has recorded a revenue but will receive cash at a later date, accounts receivable

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26
Q

accrued expense?

A

record an expense but will pay cash at a later date, accrued salaries, wages, and benefits

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27
Q

deferred revenue?

A

the company receives cash prior to a sale, someone buys a gift card

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28
Q

prepaid expense?

A

the company pays cash prior to incurring an expense, paying for supplies in advance

29
Q

historical cost?

A

the amount paid for an asset and used as a basis for recognizing it on the balance sheet and carrying it on later balance sheets

30
Q

current value?

A

the amount of cash or its equivalent that could be received by selling an asset currently

31
Q

accrual basis?

A

revenues are recognized when a performance obligation is satisfied and expenses must be recorded when they occur

32
Q

revenue recognition principle?

A

REVENUES ARE RECOGNIZED WHEN A PERFORMANCE OBLIGATION IS SATISFIED

33
Q

matching principle?

A

the association of revenue of a period with all of the costs necessary to generate that revenue

34
Q

adjusting entries?

A

journal entries made at the end of a period by a company using the accrual basis of accounting

35
Q

deferral?

A

cash has been paid or received but the expense or revenue has not yet been recognized

36
Q

deferred expense?

A

an asset resulting from the payment of cash before the incurrence of the expense

37
Q

deferred revenue?

A

a liability resulting from the receipt of cash before the recognition of revenue

38
Q

accrual?

A

cash has not yet been paid or received but the expense has been incurred or revenue recognized

39
Q

accrued liability?

A

a liability resulting from the recognition of an expense before the payment of cash

40
Q

accrued asset?

A

an asset resulting from the recognition of revenue before the receipt of cash

41
Q

permanent/real account?

A

a balance sheet account because they are permanent and are not closed out at the end of a period

42
Q

nominal account?

A

name of revenue, expense, and dividend accounts because they are temporary and are closed out at the end of a period

43
Q

closing entries?

A

journal entries made at the end of the period to return the balance in all nominal accounts to zero and transfer the net income and dividends to retained earnings

44
Q

merchandise inventory?

A

the account wholesalers and retailers use to report inventory held for resale

45
Q

raw materials?

A

the inventory of a manufacturer before the addition of any labor or manufacturing overhead

46
Q

work in process?

A

the cost of unfinished products in a manufacturing company

47
Q

finished goods?

A

a manufacturer’s inventory that is complete and ready for sale

48
Q

gross profit?

A

net sales - cost of goods sold

49
Q

sales revenue?

A

a representation of the inflow of assets from the sale of a product

50
Q

net sales?

A

sales revenue - sales returns/allowances/discounts

51
Q

cost of goods available for sale?

A

beginning inventory + cost of goods purchased

52
Q

cost of goods sold?

A

cost of goods available for sale - value of ending inventory

53
Q

perpetual system?

A

the inventory account is increased at the time of each purchase and decreased the time of each sale

54
Q

periodic system?

A

the inventory account only at the end of the period

55
Q

gross profit ratio?

A

gross profit / net sales

56
Q

specific identification method?

A

an inventory costing method that relies on matching unit costs with the actual units sold

57
Q

weighted average cost method?

A

an inventory costing method that assigns the same unit cost to all units available for sale during the period

58
Q

weighted average formula?

A

COGAS/units available for sale

59
Q

FIFO method?

A

an inventory costing method that assigns the most recent costs to ending inventory

60
Q

LIFO method?

A

an inventory costing method that assigns the most recent cost to the cost of goods sold

61
Q

LIFO liquidation?

A

the result of selling more units than are purchased during the period, which can have negative tax consequences if a company is using LIFO

62
Q

LIFO conformity rule?

A

the IRS requirement that when LIFO is used on a tax return,m it must be used in reporting income to stockholders

63
Q

LIFO reserve?

A

the excess of the value of a company’s inventory stated at FIFO over the value stated a LIFO

64
Q

replacement cost?

A

the current cost of a unit of inventory

65
Q

inventory profit?

A

the portion of the gross profit that results from holding inventory during a period of rising prices

66
Q

lower-of-cost-or-market rule?

A

a conservative inventory valuation approach that is an attempt to anticipate declines in the value of inventory before its actual sale

67
Q

inventory turnover ratio?

A

a measure of the number of times inventory is sold during the period

68
Q

the formula for inventory turnover ratio?

A

COGS/average value of inventory

Financial accounting (3 decks)

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