Terms 1

Question 1

Bank statement

Answer 1

Statement sent by the bank at the end of every month showing all transactions that took place on the relevant back account

Question 2

Bank charges

Answer 2

Charges made by the bank for cash deposit fees, cheque book fees, credit card levies, service fees, etc.

Question 3

Post-dated cheque

Answer 3

A cheque where the date is written in the future and only to be cashed on the day it is written for

Question 4

Bank-reconciliation statement

Answer 4

A document prepared by a business to explain the difference between the balance shown on the bank statement and the balance of the bank account in the firm’s general ledger.

Question 5

A misstatement is inconsequential

Answer 5

If a reasonable person would conclude after considering the possibility of further undetected misstatements that the misstatement either individually or when aggregated with other statements would clearly be immaterial to the financial statements. If a reasonable could not reach such a conclusion regarding a particular misstatement, that misstatement is more than inconsequential.

Question 6

Accelerated depreciation

Answer 6

Any method of depreciation used for accounting purposes that allows greater deductions in the earlier years of life of an asset. While the straight-line /cost depreciation method spreads the cost evenly over the life of an asset, an accelerated deprecation method allows the deductions of higher expenses in the first years after purchase and lower expenses as the deprecated items age.

Question 7

Accrual

Answer 7

Recognition of an expense or revenue that has occurred, but has not yet been recorded

Question 8

Accumulated depreciation

Answer 8

Total depreciation pertaining to an asset from the time the asset was placed in service until the date of the financial statement. This total is the contra account to the related asset account.

Question 9

Acid-test ratio

Answer 9

The relationship of a company’s current assets that can be converted into cash (current assets - inventory) to it’s current liabilities. The purpose of this is to find out whether a business is able to settle their debt without selling stock. The norm is 1:1

Question 10

Liquidity

Answer 10

The ease at which an asset can be converted into cash without affecting it’s market price

Question 11

Audit

Answer 11

A professional examination of a company’s financial statement by a professional accountant to determine that the statement has been presented fairly and prepared using Generally Accepted Accounting Principles (GAAP)

Question 12

Auditor

Answer 12

A person who audits financial statements and records kept by others.

Question 13

Bond

Answer 13

One type of long-term promissory note, frequently issued to the public as a security. Bonds can either be registered in the owner’s name or are issued as bearer instruments.

Question 14

Cash

Answer 14

Asset account on a balance sheet representing paper currency and coins, negotiable money orders and checks, bank balances, and certain short-term government securities.

Question 15

Cash dividend

Answer 15

Money or fund paid to stockholders generally as a part of the corporation’s current earnings or accumulated profits.

Question 16

Cash equivalents

Answer 16

Investment securities that are meant for short-term investing. They have high credit quality and are highly liquid.

Question 17

Cash flow

Answer 17

The total amount of money being transferred into and out of the business, especially as affecting liquidity.