FINAL EXAM Definitions

Question 1

Amounts owed for products or services purchased on account

Answer 1

Accounts payable account

Question 2

used to borrow cash or purchase asset and due within one year

Answer 2

Short-term notes payable

Question 3

Business receives cash before services or products are provided to
customers.

Answer 3

Deferred (Unearned) revenue account

Question 4

Amount of long-term debt principal payable within the next 12 months

Answer 4

CPLTD account

Question 5

sales taxes collected from customers to be remitted periodically to the state and local
governments

Answer 5

Sales Tax Payable Account

Question 6

An existing, uncertain situation that might result in a loss

Answer 6

Contingent liability account

Question 7

Based on the matching principle, the company needs to record warranty expense in
the same accounting period as the sale.

Answer 7

Warranty Expense Account

Question 8

Represents the liability account set up when warranty expense is recognized and is
used to account for warranty work performed in the future.

Answer 8

Warranty Payable Account

Question 9

Formal debt instrument that obligates the borrower to repay a stated amount, referred to
as the principal or face amount, at a specified maturity date.

Answer 9

Bonds Payable Account

Question 10

backed by collateral

Answer 10

Secured Bonds

Question 11

Not backed by collateral

Answer 11

Unsecured bonds

Question 12

bond issue matures in installments

Answer 12

Serial Bonds

Question 13

bond issue matures on a single date.

Answer 13

Term Bonds

Question 14

borrower can pay off bond early at a specified call price.

Answer 14

Callable Bonds

Question 15

Lender can convert bonds into a specified number of shares of common stock.

Answer 15

Convertible Bonds

Question 16

(rate on the face of the bond) the rate ‘stated’ in the bond contract

Answer 16

Start Rate

Question 17

debt that matures in over 12 months.

Answer 17

Long-term debt

Question 18

This type of a lease is like a rental.

Answer 18

Operating Leases

Question 19

Occurs when a lessee buys an asset and borrows the money through a lease to pay for the asset.

Answer 19

Capital Leases

Question 20

Amount of earnings the corporation has retained

Answer 20

Earned Capital

Question 21

Corporation’s stock that is reacquired

Answer 21

Treasury Stock (contra equity account)

Question 22

Basic form of stock issued by corporation

Answer 22

Common Stock Account

Question 23

Arbitrary amount assigned to share of stock in the articles of incorporation.

Answer 23

Par Value of Stock

Question 24

Represents the earnings retained in the corporation – earnings not paid out as
dividends to stockholders.

Answer 24

Retained Earnings Account

Question 25

Distribution to the shareholders of a corporation usually based on earnings

Answer 25

Dividends Account