Unit 6: Chapters 18, 19, & 20 Flashcards
adjustment
an amount that is added to or subtracted from an account balance to bring that balance up to date
beginning inventory
the merchandise a business has on hand at the beginning of the period
ending inventory
the merchandise a business has on hand at the end of a period
physical inventory
an actual count of all merchandise on hand and available for sale
prepaid expense
an expense paid in advance
adjusting entries
journal entries that update the general ledger accounts at the end of a period
capital stock
stockholder’s equity account
stockholder’s equity
value of the stockholder’s claims to the corporation
retained earnings
represents the increase in the stockholder’s equity from the portion of net income not distributed to the stockholders
comparability
allows accounting information to be compared from one fiscal period to another
reliability
refers to the confidence users have that the financial information is reasonably free from bias and error
relevance
requirement that all information that would affect decisions of financial statement users be disclosed in the financial reports
full disclosure
financial reports include enough information to be complete
materiality
relevant information should be included in financial reports
net sales
amount of sales for the period less any sales discounts, returns, and allowances
net purchases
represents all costs related to merchandise purchased during the period
gross profit on sales
the profit made before operating expenses are deducted
operating expenses
cost of goods and services used in the process of earning revenue for a business
selling expense
incurred to sell or market the merchandise sold
administrative expense
related to the management of a business
operating income
the excess of gross profit over operating expenses
vertical analysis
each $ amount reported on a financial statement is also reported as a % of another amount called a base amount (appears on same statement)
statement of retained earnings
reports the changes in the retained earnings account during the period
horizontal analysis
the comparison of the same items on a financial statement for two or more accounting periods or dates, and the determination of changes from one period of date to the next
base period
a period (usually a year), that is used for comparison
cash inflows
receipts of cash
cash outflows
payments of cash
operating activities
include all transactions that occurred during the accounting period as part of normal business operations
investing activities
includes loans the business makes, payments received for those loans, purchase & sale of plant assets (property that will be used in a business for more than one year) and investments
financing activities
borrowing activities needed to finance the company operations and the repayment of these debts
Closely Held Corporation
a corporation owned by a few persons or by family
Proxy
if a board member can not attend the meeting in which voting will take place, they can send someone else know as…
Paid-in Capital in Excess of Par
when stock is sold at a price that is above par, the excess amount over par is then credited to a separate stockholder’s equity account called:
Publicly Held Corporation
one whose stock is widely own, has a large market, and usually traded on a stock exchange
Preferred Stock
-receive dividend s before common stock holder’s
-given preference in distribution of assets (if a corporation goes out of business)
Par value
the amount assigned to each share of stock that a corporation sells
-must be printed on the stock certificate
Board of Directors
the group of people who manage the corporation and are responsible to govern affairs of the corporation.
Dividend
a distribution of cash to stockholder’s
Authorized Capital Stock
the maximum number of shares a corporation may issue
Common Stock
-elect board of directors
-share earnings by receiving dividends
-entitled to share of assets if corporation goes out of business
Statement of Stockholder’s Equity
reports all the changes in ALL stockholder’s equity accounts during the period (not just retained earnings)
