Exam 2 Flashcards
Percentage of Completion Method
Recognizing revenue based off of project percentage completed
Cash Discounts
Reductions in the amount owed by customers due to prompt payment
Bad Debts
Receivables considered to be uncollectible
Specific Write-off method
violates matching principle
Bad debt recoveries
Receivables that were previously written off but then collected
Allowance for uncollectible accounts (AUA)
contra account to accounts receivable
Days to collect A/R
365 / A/R turnover
Compensating balances
the required minimum balances a company must keep on deposit designed to partially compensate the bank for the loan
Reconcile a bank statement
To verify that the bank balance for cash is in agreement with the accounting records
Cost Valuation
process of assigning a specific value to items in inventory
Perpetual Inventory System
inventory is constantly valuated
Inventory Shrinkage
loss of inventory from theft, breakage, or loss
Specific identification method
linking individual items with their cost
Net Realizable Value
The amount the company expects to receive when it sells the inventory
Current replacement cost
what it would cost the company to buy an inventory item today
Cut-off error
Failure to record transactions in the correct time period
Raw materials inventory
cost of materials held in use for manufacturing a product
Work-in-progress inventory
cost incurred for partially completed items
Amortization
Paying off the costs of long term intangible assets in increments
Depletion
Payments on the cost of using natural resources
Capitalization
Expenditures on or for assets that will last more than a year
Fair Value
the value of an asset based on the price they could sell it to a third party
Basket Purchase (lump sum purchase)
The acquisition of 2 or more assets for a lump sum cost
Depreciable value
difference between acquisition cost and residual value
Residual value (scrap value)
The amount a company expects to receive from the sale/disposal of an asset at the end of its useful life
STL Depreciation
(Acquisition cost - scrap value) / years of useful life
Depreciation expense per unit
(Acquisition cost - scrap value) / number of units
Accelerated Depreciation
any depreciation faster than STL depreciation
Component depreciation
required by the IFRS: if a component of an asset composes significant portion of that asset, it must be depreciated separately
Improvement
if an expenditure increases future benefits of asset by: decreasing operating cost, increasing output, improving safety, reducing pollution, or prolonging useful life
Impaired
when an asset ceases to provide economic value at least as great as its book value
