Exam 3 Definitions Flashcards
Formal Process by which managers at all levels gain information about
performance of the organization and employee tasks within the firm and judge that performance against preestablished criteria as set out in financial statements, budgets, plans, and goals.
Performance Measurement System
– a company’s plan to 1.) Safeguard the company’s assets, and 2.) Improve the accuracy
and reliability of accounting information.
Internal controls
authorizing transactions, recording transactions, and maintaining control of related
assets should be separated among different employees.
Separation of duties
– inventory costing method that assumes the first units purchased (the firstin) are the first ones sold (the first-out).
First-In, First-out Method (FIFO)
inventory costing method that assumes the last units purchased (the lastin) are the first ones sold (the first out)
Last-in, First-out method
an income statement that reports multiple levels of income (or profitability)
Multi-Step Income Statement
he amount the company expects to receive from selling the assets at the end of its service life.
Residual (S- 7
alvage) value
allocated an equal amount of depreciation to each year of the assets
service life
Straight line depreciation calculation
a accelerated method that allocates a higher
depreciation in the earlier years of the asset’s life and lower depreciation in later years
Double declining balance depreciation calculation
long-term assets that lack physical substance, and whose existence is often based on a legal
contract.
Intangible asset
calculation: total revenues less any discounts, returns, and allowances.
Net Revenues
calculation: sales revenue less cost of goods sold.
Gross profit
calculation: original cost of long-term asset less accumulated depreciation.
Book Value
– an account with a balance that is opposite, or contra, to that of its related
(companion) revenue account
Contra Revenue Account
contra asset account representing the amount of accounts receivable
that we do not expect to collect. Major category - contra asset, asset; Normal balance - credit; Financial
statement - Balance Sheet.
Allowance for uncollectible accounts
seller reduction of customers’ balance owed or provision of a partial
refund because of some deficiency in the company’s product or service. Major category - contra revenue,
revenue; Normal balance - debit; Financial statement – Income Statement
Sales Allowance (Contra Revenue)
reduction in the amount to be paid by a credit customer if payment on
account is made within a specified period of time. Major category - contra revenue, revenue; Normal balance
- debit; Financial statement – Income Statement.
Sales Discount (Contra Revenue)
customer returns a product. Major category - contra revenue, revenue;
Normal balance - debit; Financial statement – Income Statement.
Sales Return (Contra Revenue)
the amount of the adjustment to allowance for uncollectible accounts, representing the
cost of estimated future bad debts charged to the current period. Major category - Expense; Normal balance -
debit; Financial statement – Income Statement.
Bad Debt Expense
cost of inventory that was sold during the period. Major category - Expense; Normal
balance - debit; Financial statement – Income Statement.
Cost of goods sold
allocation of the cost of an intangible asset over its service life. Major category -
Expense; Normal balance - debit; Financial statement – Income Statement.
Amortization Expense
