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Econ _ principles > Financial Accounting > Flashcards

Financial Accounting Flashcards

1
Q

The basic accounting equation is:

A

Assets = Liabilities + Equity

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2
Q

Formula for Equity

A

Assets - Liabilities

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3
Q

Assets are the _______

A

resources an organization owns (and does not have any dept on them!)

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4
Q

Accounts Receivable

A

Amounts to be received from customers

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5
Q

Examples of assets:

A
  • Cash
  • Inventory
  • Buildings
  • Machines
  • IT systems
  • Patents
  • Trademarks
  • Accounts Receivable
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6
Q

Accounts Receivable are the amounts to be ______ from ______

A

received; customers

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7
Q

Liabilities are the ______ an organization _______

A

resources; owes

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8
Q

Equity is the differences between what the corp. owns and what it _____

A

owes

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9
Q

__________ equity is the term used to describe the value of a corp. to its owners or what belongs to the owners

A

Owners’/ Shareholder’s Equity

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10
Q

List a few Interested Users apart from the owners of a company:

A
  • Potential Owners
  • Creditors (e.g. Banks)
  • Suppliers
  • Customers
  • NPO’s
  • Government Agencies
  • Tax Authorities
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11
Q

The value of a corporations equity can change in two ways :

A
  1. Operations; revenues and expenses resulting a net income (or a net loss
  2. Transactions with owners: - Shareholders can invest in the firm (buy shares)- Shareholders can be paid by the firm (dividends)
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12
Q

Dividends is the distribution of _______

A

cash or assets to other shareholders

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13
Q

The process of registering transactions is called _______

A

bookkeeping

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14
Q

The difference between the revenues and expenses in a period is referred to as ______

A

the net income of that period

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15
Q

Give an example of an intangible asset:

A

Intellectual property

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16
Q

Taipei Pizza, for instance, purchases cheese, sausage, fl our, and beverages on credit
from suppliers. These obligations are called ________

A

accounts payable

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17
Q

Taipei Pizza may also have ________ payable to employees and sales and
_______ payable to the local government

A

wages; taxes

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18
Q

________ is the term used to describe the amounts paid in by shareholders for the ordinary shares they purchase.

A

Share-capital ordinary

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19
Q

What can increase equity ?

A
  • investments by shareholders
  • revenues
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20
Q

This is a type of financial statements that records transactions for a specific date rather than a period of time

A

balance sheet !!!!

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21
Q

Liabilities are listed on the balance sheet in the order of their

A

maturity

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22
Q

Retained Earnings is classified as which type of account?

A

stockholder’s equity

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23
Q

A company sold 10,000 shares of its common stock for a total of $45,000. What two accounts are affected by the transaction?

A

cash and contributed capital

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24
Q

The matching principles matches revenue with _______

A

expenses

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25
Q

Retained earnings is determined by three items :

A

dividends, revenues and expenses

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26
Q

_________ are the gross increases in equity resulting from business activities entered into for the purpose of earning

A

Revenues

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27
Q

Revenues usually result in an increase in _______

A

assets

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28
Q

Sources of revenue common to many businesses are:

A
  • Sales
  • Fees
  • Services
  • Commissions
  • Interest
  • Dividends
  • Royalties
  • Rent
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29
Q

_____ are decreases in equity that result from operating the business

A

Expenses

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30
Q

The distribution of cash or other assets to shareholders is called a _______

A

dividend

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31
Q

DIVIDENDS ARE NOT ______

A

EXPENSES

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32
Q

The principles sources of equity are :

A
  • investments by shareholders
  • revenues from business operations
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33
Q

External transactions involve economic events between the _______and some outside _______

A

company and outside enterprise

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34
Q

In an economic transaction credits refer to the —-

A

SOURCE

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35
Q

In an economic transaction debits refer to the —–

A

DESTINATION

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36
Q

Destinations that economic benefit can flow to AKA debits include :

A
  • assets
  • expenses
  • dividends
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37
Q

Sources that economic benefit can flow from AKA credits include :

A
  • owner’s equity
  • liabilities
  • revenue
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38
Q

Dividends + Expenses + Assets =

A

Debits

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39
Q

Liabilities + Owner’s Equity + Revenue =

A

Credits

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40
Q

DEALER

A

Dividends
Expenses
Assets (DEBITS) +
Liabilities
Equity
Revenue (CREDITS)

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41
Q

Stuff the Business owns (assets) =

A

stuff the business owes (liabilities)

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42
Q

revenues and expenses are changes in _____ NOT in _____

A

equity , NOT in cash

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43
Q

Revenue should be recognized in the accounting period in which the performance obligation is

A

fullfiled

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44
Q

performance obligation of a seller is essentially shifting goods to the

A

CONSUMERS

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45
Q

What is the expense recognition principle?

A

Expenses are recognized in the accounting period in which the company generates revenues because of these expenses

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46
Q

When should revenue of a transaction in a restaurant be recognized?

A

as soon as the customer pays for the good

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47
Q

When is revenue for renting a house ( monthly) recognized?
rent is paid at the beginning of the month

A

total revenue is taken at the end of the year
revenue recognition is spread over time

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48
Q

prepaid expenses are payments made in

A

advance

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49
Q

Examples of prepaid expenses:

A

-insurance
-supplies
-depreciation of non-current asset

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50
Q

when buying the insurance initially an _____ is created

A

asset

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51
Q

accrued expenses

A

expenses that belong to a period but which have not been paid yet

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52
Q

deferred revenue refers to

A

refers to advance payments a company receives for products or services that are not yet delivered/shipped/rendered

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53
Q

another term for deferred revenue is _____

A

unearned revenue

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54
Q

on the income statement deferred revenue is recorded as a ______ until the product is shipped

A

liability

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55
Q

The principle of revenue recognition states that payments can only be recognized as revenue once a

A

payment is made and the service has been complete

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56
Q

Examples of deferred revenue are

A
  • rent payments received in advance
  • prepayment received for newspaper subscriptions
  • annual prepayment
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57
Q

An accrued expense is an expense that hasn’t been _____ or _____ yet.

A

recorded; paid for

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58
Q

A good example of an accrued expense are water bills since

A

they are billed in longer periods or yearly and therefore water consumer throughout a longer period is an expense that hasn’t been recorded or paid yet.

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59
Q

Are accrued expenses a liability?

A

Yes and for that reason credits increase accrued expenses and debits decrease accrued expenses

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60
Q

In “DEALER” the debits include:

A

DIVIDENDS
EXPENSES
ASSETS

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61
Q

In “DEALER” the credits include:

A

LIABILITIES
EQUITY
REVENUE

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62
Q

An increase in equity requires a ______ entry

A

credit

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63
Q

A decrease in equity requires a ______ entry

A

debit

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64
Q

Both Dividends and Expenses require a ______ entry

A

debit

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65
Q

why do expenses require a debit entry?

A

This is because expenses cause owner’s equity to decrease and equity is a credit entry

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66
Q

when equity increases what entry occurs

A

a credit entry

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67
Q

Since accounts payable are a part of liabilities account payable has a _______ balance

A

credit

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68
Q

Unearned revenue is a _________ for the recipient of the payment

A

liability

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69
Q

The 3 inventory cost flow assumptions are:

A

-LIFO
- FIFO
- AVCO

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70
Q

what does LIFO stand for?

A

Last In First Out

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71
Q

Formula for the the average-cost inventory
method?

A

total cost of goods available for sale/quantity of goods available for sale

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72
Q

Steps for the average cost inventory method:

A
  1. Sum up total units and total costs
  2. Then divide total costs by total units to get weighted cost per unit
  3. Then multiply sold items by the weighted cost per unit
  4. Subtract the total cost by total sales to get new reported inventory using AVCO
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73
Q

How is this read : 2/10, n/30

A

two ten, net thirty

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74
Q

When you buy inventory on account you _____ inventory

A

debit inventory

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75
Q

2/10,n/30 means that you have

A

a 2 percent discount if you pay within 10 days otherwise full amount within 30

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76
Q

Uncle Tupelo’s Gifts signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $150,000 with annual interest of 12%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?

A

Dr-Interest Expense 3,000
Cr-Interest Payable 3,000

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77
Q

A company shows a balance in Salaries and Wages Payable of $19,000 at the end of the month. The next payroll amounting to $24,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries?

A

Dr-S+W Expense 5,000
Dr-S+W Payable 19,000
Cr-Cash 24,000

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78
Q

The cost flow method that often parallels the actual physical flow of merchandise is the

A

FIFO method

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79
Q

In a periodic inventory system the COGS is determined when???

A

ONLY at the end of the accounting period

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80
Q

When are the COGS determined in a perpetual inventory system?

A

Each time a sale occurs

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81
Q

Typical journal entry for a purchase on account:

A

Dr. Inventory
Cr. Accounts Payable

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82
Q

Typical journal entry for a cash purchase:

A

Dr. Inventory
Cr. Cash

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83
Q

Net 10 means that a company has to pay for a good in ____

A

10 days

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84
Q

Net EOM 10 means that a company has to pay within ______

A

10 days after the end of the month

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85
Q

The procedure of transferring journal entries to the ledger accounts is
called

A

posting

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86
Q

Formula for Gross Profit:

A

Net Sales Revenue - COGS

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87
Q

a firm that sells and buys at a higher price later is called a ________

A

merchandising firm

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88
Q

Gross profit - operating expenses

A
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89
Q

Larger firms use only ______ inventory system

A

periodic

90
Q

small shops/boutiques are more likely to use _______ inventory systems

A

perpetual

91
Q

What do periodic systems not do?

A

Directly record transactions

92
Q

FOB shipping point means that the good belongs to the owner in the moment that good is ______________

A

shipped

93
Q

FOB Destination means that the good becomes the possession of the owner in the moment it ____________

A

reaches the buyer

94
Q

In FOB shipping point who pays the freight costs?

A

the Buyer

95
Q

In FOB Destination who pays the freight costs?

A

the Seller

96
Q

When buyers pay shipping costs these costs are usually considered part of ____________

A

purchased inventory

97
Q

In a perpetual accounting system everything goes through the __________

A

inventory account (super important)!!!

98
Q

Sellers generally record sales returns and allowances using a specific contra-revenue account called the

A

Sales Returns and Allowances

99
Q

sales returns and allowances has a _______ balance

A

debit

100
Q

A contra-sales revenue account such as Sales Allowances, Cash Discounts etc. has a debit balance because it is contrary to a regular _________

A

sales revenue account (which has a credit balance)

101
Q

Whenever a seller grants an allowance to the buyer we record it as a debit on :

A

sales returns and allowances

102
Q

Under the periodic inventory system, all purchases made between physical inventory counts are recorded in a

A

purchases account

103
Q

Using the FIFO approach formula for COGS=

A

COGS available for sale - ending inventory

104
Q

Using the FIFO approach the formula for ending inventory is:

A

Units available for sale - units sold * cost of last unit sold

105
Q

Using the LIFO approach the formula for ending inventory is:

A

Units a company owns - units sold * cost of first unit sold

106
Q

what are the 4 possible transactions connected to inventory?

A
  1. Sales of inventory
  2. Purchase of inventory
  3. Returns and allowances on purchased inventory
  4. End-of-period accounting activities
107
Q

What do u do when u sell inventory (perpetual system)?

A

There are 2 entires!

  1. You recognise the revenue so: Dr. Cash Cr. Sales revenue
  2. You recognise change in inventory: Cr. inventory Dr. Cost of goods sold
108
Q

What do u do when u sell inventory (periodic system)?

A

Dr. cash/accounts payable Cr. Sales revenue

109
Q

purchase of inventory entires (perpetual)

A

Dr. Inventory Cr. cash/acc payable

110
Q

Purchase of inventory entires (periodic system)

A

NEVER FCKING EVER INVENTORY ACC!

You should: Dr. Purchases Cr. Cash/acc payable OR Dr. Freight-in Cr. Cash/acc payable

111
Q

Returns and discount allowances entries (perpetual)

A

Dr. cash/acc payable Cr. Inventory

112
Q

Returns and discount allowances entries (periodic)

A

Dr. cash Cr. Purchase returns/purchase discounts

113
Q

End-of-period accounting entires (perpetual)

A

NOTHING LMAOOO

114
Q

End-of-period accounting entires (periodic)

A

We need to perform a stock count, determine the “cost of goods sold”, units sold and purchased and total sales revenue. We also get gross profit. We can calculate profit and cost of goods sold using different methods.

115
Q

The LIFO method assumes that the last goods purchased are the ___________ to be sold

A

first

116
Q

Why in periods of inflation do firms prefer the LIFO method

A

Lower income taxes and higher cash flow (hell yeah)

117
Q

TRUE OR FALSE : Transactions that affect inventories on hand have an effect on both the statement of
financial position and the income statement.

A

True

118
Q

TRUE OR FALSE : The more inventory a company has in stock, the greater the company’s profit.

A

False

119
Q

TRUE OR FALSE: Goods out on consignment should be included in the inventory of the consignor.

A

True

120
Q

TRUE OR FALSE: The average cost method costs units using a weighted-average unit cost

A

True

121
Q

TRUE OR FALSE: The first-in, first-out (FIFO) inventory method results in an ending inventory valued at the
most recent cost.

A

True

122
Q

TRUE OR FALSE: If the unit price of inventory is increasing during a period, a company using the averagecost inventory method will show less gross profit for the period, than if it had used the
FIFO inventory method.

A

True

123
Q

TRUE OR FALSE: Use of the FIFO inventory valuation method enables a company to report higher net
income when in a period of falling prices.

A

False

124
Q

TRUE OR FALSE: If a company changes its inventory valuation method, the effect of the change on net
income should be disclosed in the financial statements.

A

True

125
Q

TRUE OR FALSE: An error that overstates the ending inventory will also cause net income for the period to
be overstated.

A

True

126
Q

TRUE OR FALSE: If an error understates the beginning inventory, net income will also be understated.

A

false

127
Q

TRUE OR FALSE: If a company uses the FIFO cost assumption, the cost of goods sold for the period will be the same under a perpetual or periodic inventory system.

A

True

128
Q

TRUE OR FALSE: In all cases when average-costing is used, the cost of goods sold would be the same
whether a perpetual or periodic system is used.

A

False

129
Q

TRUE OR FALSE: Under the FIFO method, the costs of the earliest units purchased are the first charged to
cost of goods sold.

A

True

130
Q

TRUE OR FALSE: In a period of falling prices, the average-cost method results in a lower cost of goods sold than the FIFO method.

A

true

131
Q

TRUE OR FALSE: Inventories affect both financial statment and statement of financial position (aka balance sheet)

A

True

132
Q

Merchandise inventory is reported as a ________ on the statement of financial position

A

current asset

133
Q

Items not placed into production are considered to be :

A

raw materials

134
Q

If goods in transit are shipped FOB destination the ________ has legal title to the goods until they are delivered

A

seller

135
Q

The term ‘FOB” denotes:

A

free on board

136
Q

As a result of a thorough physical inventory, Hastings Company determined that it had
inventory worth $620,000 at December 31, 2017. This count did not take into
consideration the following facts: Carlin Consignment store currently has goods worth
$104,000 on its sales floor that belong to Hastings but are being sold on consignment by
Carlin. The selling price of these goods is $150,000. Hastings purchased $40,000 of
goods that were shipped on December 27 FOB destination, that will be received by
Hastings on January 3. Determine the correct amount of inventory that Hastings should
report.

A

724 000 USD

137
Q

Bellingham Inc. took a physical inventory at the end of the year and calculated that
£1,750,000 of goods were on hand. Bellingham determined that £25,000 of goods were in
transit. The goods were shipped f.o.b. shipping point and were received by Bellingham
two days after the inventory count. The company also had £275,000 of goods out on
consignment. What amount should Bellingham report for inventory on its statement of
financial position?

A

£2,050,000.

138
Q

A major advantage of the FIFO method is that in a period of inflation, the costs allocated to ending
inventory will approximate ______________

A

their current cost.

139
Q

Why do firms use AVCO in times of rising prices (inflation)

A

Because AVCO results in lower income taxes, which directly corresponds to the lower net income

140
Q

The entire group of accounts that are maintained by a company is called a ____________

A

ledger

141
Q

What are the differences between Journal and Ledger?

A

The journal consists of raw accounting entries that record business transactions, in sequential order by date. The general ledger is more formalized and tracks five key accounting items: assets, liabilities, owner’s capital, revenues, and expenses.

142
Q

Is it possible to prepare the balance sheet directly from the journal?

A

No, however this can be done from the ledger

143
Q

What is the difference between an error and irregularity?

A

Error is a result of an unintentional mistake whereas an irregularity is a result of an intentional misstatement and it is viewed as UNETHICAL

144
Q

Accounting time periods are generally:

A

a month, a quarter, or a year

145
Q

Monthly and quarterly time periods are called ________ periods

A

interim

146
Q

How do we call accounting systems that register changes in the value of equity (revenues and expenses) in addition to, and seperately, from cash flows?

A

Accrual-basis accounting

147
Q

How do we call an accounting system that records revenue at the time they receive cash?

A

Cash-basis accounting

148
Q

Accrual-basis accounting is in accordance with which accounting standard?

A

International Financial Reporting Standards (IFRS)

149
Q

When a company agrees to perform a service or sell a product to a customer it has a ___________ obligation

A

performance

150
Q

When it comes to accruals cash is paid before or after?

A

after

151
Q

When it comes to deferrals is cash paid before or after?

A

Before

152
Q

How do accountants deal with complications caused by either deferrals or accruals?

A
  1. At the moment of the first transaction, an asset or liability is created
  2. At the end of the period, an adjusting entry is made
153
Q

An adjusting entry for prepaid expenses results in a :

A

debit to a prepaid expense account and a credit to an asset account

154
Q

Using WHICH account is depreciation recorded?

A

Using a contra-asset account

155
Q

A contra-asset account has a _________ balance

A

credit

156
Q

Formula for book value of an asset=

A

Total value of an asset - accumulated depreciation - other expenses

157
Q

The cost of carrying an asset on a company’s balance sheet refers to ________

A

book value

158
Q

The adjusting entry for unearned revenue results in a

A

dr. Unearned revenue account
cr. sales revenue

159
Q

Petty cash has a _____ balance

A

debit

160
Q

Cash over and short is an income statement account that records a _______

A

shortfall of cash or an oversupply of cash

161
Q

Cash over and short has a ________ balance

A

debit

162
Q

Internal control serves 4 purposes:

A
  1. safeguard assets
  2. enhance accuracy of accounting records
  3. ensure compliance with laws and encourage employees to follow rules
163
Q

Larceny is _______________

A

taking cash or property from the business

164
Q

Embezzlement concern

A

theft of cash by someone in a position of trust like a bookkeeper or manager

165
Q

Income summary balance for revenue is _________ from the income summary balance for expenses

A

different !!!!

166
Q

Formula for retained earnings

A

Net income - dividends =
= Revenue - expenses - dividends

167
Q

The matching principle holds that…

A

expenses should always be
recorded in the same period as the revenues that they have helped to
generate.

168
Q

Monetary unit assumption states that….

A

only transactions which can be measured in monetary terms are recorded in a company’s books of accounts

169
Q

Comprehensive income includes:

A

-net income
-unrealized income
-unrealized gains and losses
-foreign transactions gains and losses

170
Q

Determination of net income vs comprehensive income statement

A

Determination of net income includes only the net gains/losses through recording revenues, expenses and profitability whereas comprehensive income statement includes all additional things like unrealized gains/losses or unrealized income or gains/losses from foreign transactions

171
Q

The three steps in the accouting process are:

A

identification, recording, communication

172
Q

Which accounting standard is used by most companies in the US?

A

FASB

173
Q

Which accouting standard-setting body is most common (used in 130 countries except the US)

A

IASB, which is determined by IRFS

174
Q

Historical cost principle is also known as the

A

cost principle

175
Q

The Fair value principle states that ___________

A

assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability).

176
Q

The monetary unit assumption holds that companies should include in the accouting records only transaction that can be recorded in _________

A

monetary terms

177
Q

What does convergence refer to?

A

To efforts to reduce differences between U.S. GAAP and IRFS

178
Q

With accounting’s economic entity assumption should the personal expenses of the owner be seperated from those of the economic entity

A

YES

179
Q

describes the amounts paid in by shareholders for the ordinary shares they purchase.

A

Share-capital ordinary

180
Q

What does the statement of cash flows convey?

A

summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.

181
Q

This document reports the assets, liabilities, and equity of a company at a specific date. (Sometimes referred to as a balance sheet.)

A

statement of financial position

182
Q

Gross profit rate =

A

Revenue - COGS/ Revenue * 100 or Total Sales - COGS/Total Sales * 100

183
Q

This statement summarizes the changes in retained earnings for a specific period of time.

A

Retained Earnings Statement

184
Q

This statement presents other comprehensive income items that are not included in the determination of net income in 1.

A

Comprehensive Income Statement

185
Q

When is the statement of financial position usually written up>

A

Usually the month-end or year-end

186
Q

What is the structure of the statement of financial position?

A

Lists assets at the top, followed by equity and then liabilities

187
Q

Forensic Accounting

A

Investigate theft and fraud using accounting, auditing, and investigative skills

188
Q

Governmental Accounting

A

Tax authorities, local governments, law enforcement agencies, company regulators, accounting educators at public colleges and universities

189
Q

Private Accounting

A

Individuals in private accounting are employees of for-profit companies and not-for-profit organizations. Choices: Cost accounting, budgeting, accounting information system design and support, tax planning and preparation, internal auditing

190
Q

Public Accounting

A

Individuals in public accounting offer expert service to the general public, in much the same way that doctors serve patients and lawyers serve clients. Choices: Auditing, taxation, management consulting

191
Q

What is a compound entry?

A

An entry that requires three or more accounts. The standard format requires that all debits be listed before the credits.

192
Q

The entire group of accounts maintained by a company is called a

A

ledger

193
Q

What journal entry is made when a firm wants to create an allowance for doubtful accounts?

A

Dr. Bad debt expense
Cr. Allowance for doubtful accounts

194
Q

When a firm that owes you money files for bankrupcy (so they won’t pay u!) what hournal entry will you make?

A

Dr. Allowance for doubtful accounts
Cr. Accounts receivable

195
Q

General journal definition

A

a book of original entries, in which accountants and bookkeepers record raw business transactions, in order according to the date events occur.

196
Q

What are T-accounts

A

A term for a type of finantial records that use debit and credit balance

197
Q

REMEMBER THAT SUPPLIES AND EQUIPMENT ARE NOT THE SAME

A

ENTRY

198
Q

What is chart of accounts

A

Chart of accounts is the index/list of all accounts used by a firm. It usually provides every accounts with its unique number

199
Q

order of accounts in the trial balance:

A

ASSETS
LIABILITIES
EQUITY
REVENUE
EXPENSES

200
Q

An accouting period that is one year in length is referred to as the :

A

fiscal year

201
Q

The principle that states that expenses should be matched with revenues is called the ____________ principle

A

expense recognition principle

202
Q

Cash-basis accounting applies to companies that _______

A

record revenues when they receive cash and record expenses when they pay out cash

203
Q

managerial accaounting is…

A

method of accounting that creates statements, reports, and documents that help management in making better decisions related to their business’ performance

204
Q

For information in accouting statements to be relevant it should have ______

A

predictive value; confirmatory value; and be material

205
Q

This refers to the quality of information that gives assurance the information accurately depicts what really happened

A

Faithful Representation

206
Q

This means using the same accounting principles and methods from year to year

A

Consistency

207
Q

Dividends increase/decrease equity?

A

decrease

208
Q

What is a worksheet accounting?

A

An accounting worksheet is a tool used to determine the accuracy of the financial statements prepared by a company at the end of the accounting period

209
Q

Steps in using a worksheet :

A
  1. Prepare a trial balance on the worksheet
  2. Enter adjustment data
  3. Enter adjusted balances
  4. Enter adjusted balances to appropriate statement columns
  5. Total the statement columns, compute net income, and complete the worksheet
210
Q

Income statement only features :

A

Revenues and Expenses

211
Q

Statement of financial position only features:

A

ALE aka assets, liabilities, equity

212
Q

Comprehensive income statements has 2 main sections:

A

Net income and Other comprehensive income (hedges, unrealized gains/losses, foreign currency cransactions)

213
Q

Why is property or land not an asset but equipment is?

A

Assets are things that you can earn money on/sell em

214
Q

When u deposit cash to a bank account in exchange for shared capital what will be the journal entry?

A

Dr. cash Cr. share capital - ordinary

215
Q

What type of company reports gross profit?

A

A merchandising company

216
Q

Which type of company has a shorter operating cycle

A

Service company as opposed to a merchandising company

217
Q

In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting:

A

Inventory

218
Q

What are non-current assets?

A

company’s long-term investments that are not easily converted to cash or are not expected to become cash within an accounting year. For example: investments, intelectual property, real estate and some equipment.

219
Q

How do companies allocate the costs of long-term assets?

A

Costs are spread over the amount of year an asset will be used instead of allocating the entire cost to one single accounting period

220
Q

The account: Property, plant and equipment refers to what asset?

A

Long-term / non-current assets of the firm

221
Q

What are non-current liabilities?

A

The non-current liabilities definition refers to any debts or other financial obligations that can be paid after a year

222
Q

What are current liabilities?

A

Current liabilities are a company’s short-term financial obligations that are due within one year or within a normal operating cycle.

Econ _ principles (11 decks)

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