ALOE
Part of ALOE that represents what a company owns. Examples include cash, inventory, and equipment.
What are assets?
Supporting principle that says you should record the same way all the time so your numbers stay clear.
What is consistency?
An accounting professional who prepares tax returns.
What is a tax accountant?
Assets normally increase with this type of entry.
This ratio shows how easily a company can pay its short-term bills using current assets.
What is the current ratio?
The financial statement built around the ALOE equation.
What is the balance sheet?
This principle requires expenses to be recorded in the same period as the revenues they generate.
What is the matching principle?
An accounting professional who reviews financial statements.
What is an auditor?
Liabilities normally increase with this type of entry.
What is a credit?
This ratio tells you how much profit a company makes for every dollar of sales.
What is the profit margin?
If assets increase by $10,000 and OE stays the same, then this must also increase to keep the equation in balance.
What are liabilities?
When an item is sold, GAAP requires you to record this to show how much the item cost.
What is Cost of Goods Sold?
Earning this three-letter credential is a common goal for accounting graduates.
What is a CPA?
If a company pays cash on accounts payable, cash is credited, and this account is debited.
What is A/P?
This ratio shows how much profit a company makes compared to the total assets it uses.
What is return on assets?
When a company earns revenue, this part of ALOE increases unless expenses are higher than revenue.
What is owner's equity?
This principle requires companies to record revenues when they are earned rather than received.
What is the revenue recognition principle?
This type of accountant typically investigates financial records to uncover fraud or embezzlement.
What is a forensic accountant?
A company purchases equipment by paying cash. The two accounts affected are equipment and cash. This account is credited.
What is Cash?
This ratio shows how much of a company's assets are financed by debt.
What is the debt ratio?
If assets total $120,000 and liabilities total $45,000, this is the owner's equity.
What is $75,000?
The idea that a business will continue operating long enough to meet its obligations.
What is going concern?
This professional oversees financial planning processes, such as developing budgets or creating long-term financial forecasts.
What is a CFO?
A company collects $800 from a client who previously purchased services on account. Cash is debited; this account is credited.
What is A/R?
This ratio compares a company's stock price to its earnings per share.
What is the price-to-earnings (P/E) ratio?