Final Flashcards
Asset
Economic resources that are owed by a business and are expected to benefit future operations
Physical- building machinery ect..
Legal- amount due from customers, investments in gov ect…
Liability
Financial obligations or debt
Listened in order or expected to be repaid
Revenue
Prices of goods sold and services given during a given accounting period
Ex. Sales, fees earned, commission earned
Expense
Always cause a decrease in owners equity
Ex . Rent expense, interest expense, electric expense, wages expense
Dividend
Distribution of assets
Not an expense
Not deducted from revenue
Retained earnings
Portion of stockholders equity resulting from profits earned and retained in the business
Cost principle
Accounts receivable are shown at the initial cost of the merchandise to customers
Matching principle
Off setting expenses and revenue
Accrual-basis accounting
Recognize when revenue is earned and recognize expenses when the related goods or services are used
Revenue recognition (realization) principle
Revenue should be recognized at the time the goods are sold or services are rendered
Net sales
sales- sales returns and allowances- sales discount
Gross profit
Measured the profitability of sales transactions
NOT represent overall profitability
Principle of conservatism
Using the lowest reasonable estimate for the amount of uncollectible accounts
Accounts receivable turnover ratio
Annual net sales / average accounts receivable
Higher the more liquid the company’s receivables
Inventory turnover ratio
Cost of goods sold / average inventory
Higher the quicker a company can sell inventory
