Vocabulary Flashcards
Absorbed Costs
Overhead costs that have gone into the cost of products that have been manufactured.
Accelerated Depreciation
Any method of depreciation that loads higher depreciation expense into the early years of an asset’s useful life.
Accounts Payable
Money that is owed to suppliers of goods or services. It is, in effect, an interest-free loan from the suppliers.
Accounts Receivable
Debts owed by others to the entity, usually for goods and services.
Accounts Receivable Turnover
How many times accounts receivable were collected during the year. (Net sales divided by accounts receivable.)
Accrual Accounting
The process of recording transactions when they happen (not when they are paid for) to meet the matching principle.
Accumulated Depreciation
The total of depreciation expense that has been listed as an expense on the income statements since the first day a piece of equipment was put into use.
Allowance for Bad Debts
The accumulation of amounts subtracted from sales as future bad debt expense. It is reduced by amounts that become known (uncollectible) bad debts.
Assets
Economic resources acquired and owned by an entity
Bad Debt Expense
The amount that is subtracted from sales revenue for the portion of sales that will probably become bad debts.
Bad Debts
Amounts owed by customers who are insolvent, bankrupt, or have disappeared. Payment will never be collected.
Balance Sheet
A financial report listing the assets, liabilities, and owners’ equity as of a specific date.
Bond
One of a series of notes that are sold to investors
Book Values
Values that are reflected on balance sheets. They do not necessarily represent market values.
Breakeven Point
That level of sales at which there is neither income nor loss.
Capitalization of Earnings
The computation of the investment amount that will yield, at a desired rate of return, an amount equal to the net income of a company.
Capitalization Policy
A dollar figure below which equipment cost will not be depreciated but will be considered an expense in the year the equipment is acquired.
Capitalized Lease
A least that is substantially an installment sale rather than a rental agreement.
Cash Basis
The method of accounting that treats cash received for products and services as income and cash disbursed as expense.
Cash Disbursements
All checks written (and mailed) or cash paid out.
Cash Discount
An allowance granted to a customer for prompt payment of an invoice. It is an expense relatvive to the quick collection of money and should not be confused wiht a sales allowance that is granted for other reasons.
Cash Flow
The cash that can be generated by a business, or a particular project, over a period of time.
Cash Flow Statement
A financial statement that shows the sources and uses of cash.
Cash Receipts
All the checks, money orders, and cash received in a given period of time.
Cash Sale
Merchandise or service that is delivered to a customer and on which payment is collected, on delivery, in cash (or equivalent, such as checks and money orders).
Common Size Financial Statement
A financial statement, expressed in percentages only, as an income statement in which the line items are expressed as percentages of net sales.
Comparative Financial Statements
A format of financial statement that presents two (or more) years of financial statement figures side by side, so they can be compared.
Completed-Contract Method of Reporting Income
Applicable to short-term contracts. Income is reported as earned only upon completion of the contract.
Conservatism Principle
Income is not shown on a report until it is earned (generally when a sale takes place), but losses are reported as soon as there is a possibility they might occur. Similarly, most assets on the balance sheet are valued at the lower of their cost or replacement cost.
Consignment Sale
Merchandise is shipped to someone who appears as a dealer, but is actually an agent for the shipper. The shipper retains title until the agent sells the goods and remits payment (less agent’s commission) to the shipper.
Consistency Principle
An accounting principle that the same accounting methods should be followed year after year so that several years’ financial statements can be compared.
Contribution Margin
That portion of the selling price of an item that remains after variable costs and expenses are paid.
Controllable Cost or Expense
A cost or expense that can be challenged by the action of a manager at a given level of management.
Convertible Preferred Stock
Preferred stock that can be exchanged, at the option of the preferred stockholder, for common stock in the same corporation, at a rate set when the stock is originally issued.
Corporation
An entity created by the state. It is a legal person, usually with unlimited life and limited liability.
Cost
The amount of money or other asset paid for something. The something received can be cost of sales, expense, or it can be another asset, such as inventory. Also, a cost can be incurred by creating a liability (as an account payable).
Cost Of Goods Sold
The cost to the company of the merchandise that was sold to customers.
Credit Sale (Sale on Account)
Exchange of goods or services in exchange for a promise to pay at some date in the future.
Creditor
A company or individual to whom money is owed.
Cumulative Preferred Stock
Preferred stock on which, if dividends are omitted (not paid) in any year, the preferred stock dividends for previous years must be paid before any dividends on common stock can be paid.
Current Assets
Those assets that are cash or will be converted to cash within the next 12 months.
Current Liabilities
Those obligations that will become due within the next 12 months
Current Ratio
Total current assets divided by total current liabilities.
Debt-To-Equity Ratio
Total liabilities divided by total equity.
Declaration Date
The day on which the board of directors of a corporation declares that the stockholders will receive a dividend, and how much that dividend will be.
Deferred Income
A liability for income that has been received but not yet earned.
Deferred Income Tax
The amount computed by subtracting the actual income tax owed from the income tax computed on net income computed by GAAP, if the result is a positive number (an additional liability). It may or may not represent an amount that will have to be paid some day.
Depreciation
The spreading out, or allocation, of the cost of the equipment over the useful life of the equipment.
Direct Costs or Expenses
Those items and labor that become part of a finished product.
Direct Labor Cost
The cost of the people who actually do the work of putting the product together.
Direct Materials Cost
The materials that end up being part of the finished product.
Dividends
The payments of part or all of the earnings of the corporation to stockholders. Generally, dividends must be made in proportion to the number of shares of stock owned by each stockholder.
Earnings
Usually means the same as net income, but in some areas (e.g., long-term
