Definitions
Allocating the cost of an asset over its useful life.
What is depreciation?
The life of the entity is reported in fiscal years.
What is the Time Period assumption?
An account that reduces a related account on the financial statements.
What is contra account?
Cost - salvage value / number of 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?
Assets: $20,000; Liabilities: $8,000; Expenses: $2000; Stockholder equity is _____.
What is $12,000?
A business purchases supplies on account.
What are Supplies and Accounts Payable?
Net Sales minus Cost of Goods Sold
What is Gross Profit?
Record assets and revenue at cost.
What is the Measurement (Cost) Principle?
Alternative to the Accrual Basis.
What is the Cash Basis?
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 for staff morale, 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?
The Excel function we used to calculate loan payments.
What is PMT?
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 accounting principle, which matches revenues with expenses 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