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FA > Financial_Accounting_Challenging_Terms > Flashcards

Financial_Accounting_Challenging_Terms Flashcards

1
Q

Accrual Accounting

A

Recognizing revenue when earned and expenses when incurred, regardless of cash flow.

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2
Q

Allowance Method

A

An accounting method for recording bad debts by estimating uncollectible receivables.

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3
Q

Amortization

A

The gradual reduction of debt or intangible asset value over time through scheduled payments or charges.

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4
Q

Bonds Payable

A

A long-term liability representing money borrowed through the issuance of bonds.

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5
Q

Chart of Accounts

A

A structured list of an organization’s accounts, used for recording financial transactions.

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6
Q

Contingent Liabilities

A

Potential obligations depending on the outcome of future events.

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7
Q

Cost of Goods Sold (COGS)

A

The direct costs attributable to the production of goods sold by a company.

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8
Q

Gross Profit

A

Revenue from sales minus the cost of goods sold (COGS).

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9
Q

Historical Cost

A

The original monetary value of an asset recorded at the time of acquisition.

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10
Q

Internal Controls

A

Processes implemented to ensure accurate financial reporting and compliance with regulations.

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11
Q

Matching Principle

A

The accounting principle of recognizing expenses in the same period as related revenues.

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12
Q

Materiality

A

The significance of financial information’s omission or misstatement on decision-making.

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13
Q

Notes Payable

A

Written promises to pay a specific amount of money at a future date.

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14
Q

Perpetual Inventory System

A

An accounting method that updates inventory records in real-time as transactions occur.

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15
Q

Post-Closing Trial Balance

A

A report listing all accounts and their balances after closing entries are posted.

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16
Q

Revenue Recognition Principle

A

Revenue is recognized when earned, not necessarily when received.

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17
Q

Retained Earnings

A

Accumulated net income retained for reinvestment rather than distributed as dividends.

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18
Q

Trial Balance

A

A list of all ledger accounts with their balances to check that debits equal credits.

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19
Q

Unearned Revenue

A

Money received before a service or product is delivered, recorded as a liability.

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20
Q

Units of Production Method

A

A depreciation method allocating cost based on asset usage or output.

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21
Q

Working Capital

A

Current assets minus current liabilities, indicating short-term financial health.

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22
Q

Accruals vs. Deferrals

A

Accruals recognize revenues and expenses when earned/incurred, while deferrals postpone recognition until cash flow.

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23
Q

Asset Retirement Obligation (ARO)

A

A liability for costs associated with retiring a long-lived asset.

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24
Q

Basel III Compliance

A

Global regulatory standards for banks to improve risk management and financial stability.

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25
Q

Carrying Amount

A

The value at which an asset or liability is recognized on the balance sheet.

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26
Q

Covenants

A

Restrictions or conditions in loan agreements protecting creditors.

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27
Q

Deferred Tax Liability

A

Taxes owed in the future due to temporary differences between accounting and tax income.

28
Q

Derivative Financial Instruments

A

Contracts deriving value from underlying assets, e.g., options or futures.

29
Q

Earnings Management

A

Deliberate manipulation of financial reports to meet certain targets.

30
Q

Fair Value Hierarchy

A

Levels of valuation inputs, from observable market data to unobservable assumptions.

31
Q

Foreign Currency Translation

A

The process of converting financial statements of foreign operations to the parent company’s reporting currency.

32
Q

Functional Currency

A

The primary currency of the economic environment in which an entity operates.

33
Q

Held-for-Trading Securities

A

Investments intended to be sold in the near term for short-term profit.

34
Q

Hedging

A

Using financial instruments to offset potential losses from other investments.

35
Q

IFRS 16 Leases

A

The accounting standard requiring almost all leases to be capitalized on the balance sheet.

36
Q

Impairment Loss

A

A write-down when an asset’s carrying amount exceeds its recoverable amount.

37
Q

Income Smoothing

A

A strategy to reduce fluctuations in reported earnings over time.

38
Q

Intercompany Transactions

A

Transactions between entities within the same group, requiring elimination in consolidated statements.

39
Q

Inventory Obsolescence

A

Loss of value in inventory due to market demand changes or technological advancements.

40
Q

Joint Cost Allocation

A

Apportioning costs incurred for jointly produced products or services.

41
Q

Lease Classification Test

A

Evaluation to determine whether a lease is operating or finance.

42
Q

Mark-to-Market Accounting

A

Recording assets or liabilities at current market value.

43
Q

Material Weakness

A

A significant deficiency in internal controls likely to result in material misstatements.

44
Q

Multi-Step Income Statement

A

An income statement separating operating activities from non-operating activities.

45
Q

Negative Goodwill

A

Arises when the purchase price of an acquisition is less than the fair value of net assets acquired.

46
Q

Off-Balance-Sheet Financing

A

Financial obligations not recorded on the balance sheet, e.g., operating leases.

47
Q

Other Comprehensive Income (OCI)

A

Revenues, expenses, gains, and losses excluded from net income, e.g., unrealized gains.

48
Q

Pooling of Interests Method

A

An accounting method for mergers, now replaced by the acquisition method.

49
Q

Push-Down Accounting

A

Adjusting subsidiary financial statements to reflect the parent’s purchase price allocation.

50
Q

Residual Value

A

The estimated salvage value of an asset at the end of its useful life.

51
Q

Revenue Recognition Criteria

A

Specific rules under IFRS and GAAP for recognizing revenue in financial statements.

52
Q

Revolving Credit Facility

A

A line of credit providing the borrower with flexible access to funds.

53
Q

Sale-Leaseback Transaction

A

The sale of an asset with a lease agreement to lease it back.

54
Q

Share-Based Payment

A

A transaction where an entity receives goods/services as consideration for equity instruments.

55
Q

Step Acquisition

A

A business combination achieved in stages, requiring revaluation of previous equity interests.

56
Q

Straight-Line Depreciation

A

A depreciation method allocating equal expense amounts over an asset’s useful life.

57
Q

Subsequent Event

A

An event occurring after the balance sheet date but before financial statements are issued.

58
Q

Tax Effect Accounting

A

Recognizing deferred tax assets/liabilities due to timing differences in accounting.

59
Q

Time Value of Money

A

The concept that money available now is worth more than the same amount in the future.

60
Q

Uncertain Tax Positions

A

Tax positions where there is uncertainty regarding recognition or measurement.

61
Q

Unit-of-Production Method

A

Depreciation method based on actual usage or output of an asset.

62
Q

Valuation Allowance

A

A contra-account reducing the carrying amount of deferred tax assets.

63
Q

Weighted Average Cost of Capital (WACC)

A

A firm’s cost of capital weighted by equity and debt proportions.

64
Q

Window Dressing

A

The practice of improving financial statement appearance before reporting.

65
Q

Workforce Intangibles

A

Intangible assets representing the value of a company’s trained and assembled workforce.

66
Q

Zero-Based Budgeting

A

Budgeting from scratch by justifying all expenses, not based on historical data.

67
Q

Z-Score Model

A

A statistical model predicting bankruptcy risk based on financial ratios.

FA (1 decks)

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