Definitions
Allocating the cost of an asset over its useful life.
What is depreciation?
Company's financial records are kept separate from owner's personal finances.
What is business entity assumption?
An account that reduces a related account on the financial statements.
What is contra account?
Cost - salvage value / years of expected life
What is straight line depreciation?
A business pays $240 for a 6 month insurance policy.
What are Cash and Prepaid Insurance?
Allocating the cost of a natural resource over the period it is consumed.
What is depletion?
The assumption that a business will go on indefinitely.
What is Going Concern?
A form of business entity legally separate from its owners.
What is a corporation?
Net Sales - Cost of Goods Sold =
What is Gross Profit?
A business purchases supplies on account.
What are Supplies and Accounts Payable?
Allocating the cost of intangible assets over their useful life.
What is Amortization?
Record assets and revenue at cost.
What is the Measurement (Cost) Principle?
Account used when cash in register does not equal records.
What is the Cash Over or Short?
Employee salary multiplied by 6.2%
What is social security tax?
A business sold $700 of goods to a customer on account.
What are Accounts Receivable and Sales Revenue?
An asset's cost minus its salvage value?
What is book value?
If you expense a $50 pizza party, this principle says it’s okay because the amount is small.
What is Materiality?
CD's, money market accounts, and T-bills
What are cash equivalents?
Interest calculation
What is Principle X Rate X Time?
A business recorded 1 year of depreciation for a vehicle.
What are Depreciation Expense and Accumulated Depreciation?
Beginning inventory plus purchases.
What is merchandise available for sale?
Adjusting entries are necessary to comply with this principle to match revenue with expense in the period they occur.
What is the Matching Principle?
2/10, n/30
What are credit terms?
A $10,000 bond trading at 103 means the bond is sold for ___
What is $10,300?
A company issued 500 shares of $10 par value Common Stock for $10 per share.
What is debit Cash, credit Common Stock $10 PV