FINANCIAL STATEMENTS
The FS shows a company's financial position at a specific point in time
What is a Balance Sheet - Statement of Financial Position
The principle that states revenue is recognized when earned, regardless of when cash is received.
What is Revenue Recognition
The journal entry to record the purchase of inventory on credit.
This ratio measures a company’s ability to pay short-term obligations with its most liquid assets.
What is the current ratio?
The accounting cycle starts with this step.
What is identifying and analyzing transactions?
This statement shows the company's profitability over a period.
What is an Income Statement
The matching principle aligns these two elements in the same period.
What are Revenues and Expenses
The journal entry to record depreciation expense.
What is debit depreciation expense and credit accumulated depreciation?
This profitability ratio is calculated by dividing net income by total revenue.
What is the net profit margin?
After journalizing transactions, they are posted to this record.
What is the general ledger?
The statement that explains changes in a company's cash position.
What is a Statement of Changes in Equity
This principle requires financial statements to be free of bias and influence.
What is objectivity
The entry to record cash received in advance of providing a service.
What is debit cash and credit unearned revenue?
This ratio shows how efficiently a company uses its assets to generate sales.
What is the asset turnover ratio?
This document summarizes all ledger accounts and is used to prepare financial statements.
What is the trial balance?
Assets minus liabilities equals this component of the balance sheet.
What are Equities
Expenses and revenues must be recorded at their original transaction cost, according to this principle.
What is the historical cost principle
The journal entry to record the payment of dividends.
What is debit dividends payable and credit cash?
The ratio used to measure the proportion of debt financing relative to equity.
What is the debt-to-equity ratio?
Adjusting entries are recorded to align financial records with these types of principles.
What are accrual basis accounting principles?
This section of the cash flow statement reflects cash flows from daily business operations.
What is Operating Activities
The principle that assumes a business will continue operating indefinitely.
What is the going concern principle?
The journal entry to correct a previous error where an expense was recorded instead of an asset.
What is debit the correct asset account and credit the incorrect expense account?
This liquidity ratio excludes inventory from current assets when measuring short-term obligations.
What is the quick ratio (or acid-test ratio)?
The final step of the accounting cycle involves preparing this record to ensure accounts are reset for the next period.
What is the post-closing trial balance?