The Accounting Cycle
Chapters 2-4
Chapters 2-4
Revenue recognition
States that revenue of a business is recognized when earned.
Merchandising company
A company which sells goods to customers.
Collusion
When two or more people get together for the purpose of circumventing prescribed controls
Determinable liability
Has a known payee, amount owed and due date.
Intracompany comparisons
Comparisons of financial data made within a company
Adjusting entries
Every time financial statements are prepared.
Periodic inventory system
Inventory is adjusted when inventory is counted at the end of the accounting period.
NSF
Not sufficient funds.
Note payable
A written promissory note.
Horizontal analysis.
Technique for evaluating a series of financial statement data over a period of time to determine the amount and/or percentage increase or decrease that has taken place.
Closing entries
Need to bring the revenue and expense accounts to zero balances and update owner's equity.
FOB destination
Buyer accepts ownership when the goods are delivered to the buyer.
Net realizable value
The net amount expected to be received in cash from receivables.
Bond market price
Present value of a bond.
Vertical analysis
Technique which expresses each item within a financial statement in terms of a percent of a base amount.
Post-closing trial balance
Will show only permanent account balances.
FIFO inventory cost formula
Assumes that the cost of the latest units purchased is the last to be allocated to ending inventory.
Carrying amount
Asset's cost less accumulated depreciation
Bonds at a discount
If the market rate of interest is greater than the contractual rate of interest on a bond.
Liquidity ratios
Measure a company’s ability to meet its maturing obligations.
Work sheet does NOT show
The ending balance in the owner's capital account.
LCNRV
Lower of count and net realizable value.
Natural resources
Are physically extracted in operations and are replaceable only by an act of nature.
Interest coverage ratio
Measures the ability of the company to meet interest payments as they are due.
Price-earnings ratio
The ratio of the market price of each share to the earnings per share.