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65 Cards in this Set
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A debit balance account that is offset against revenue int he income satement. Ex in sales discounts and sales return and allowances
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Contra-revenue account
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a general ledger account that summarizes the content of a specific subsidiary ledger
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control account
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the cost to a merchandising company of the goods it has sold to its customers during the period.
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cost of good sold
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net sales revenue minus the COGS
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gross profit
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merchandise intended for resale to customers
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inventory
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the loss of merchandise through such causes as shoplifting, breakage and spoilage
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inventory shrinkage
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gross sales revenue less sales returns and allowances and sales discounts. the most widely used measure of dollar sales volume; usually the first figure shown in an income statement
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net sales
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the repeating sequence of transactions by which a business generates its revenue and cash recepits from customer
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operating cycle
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a system of accounting for merchandising transactions in which the inventory and COGS accouns are kept up to date
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perpetual inventory system
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electronic cash registers used for computer-based processing of sales transactions
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point of sale terminals
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an accounting record or device designed for recording large numbers of a particular type of transaction quickly and efficiently
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special journal
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a ledger containing separate accounts for each of the items making up the balance of a control account in the general ledger. the total of the account balances in a ____ ledger are equal to the balance in the general ledger control account
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subsidiary ledger
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a ratio used to measure the liquidity of A/R and the reasonableness of the A/R balance. computed by dividing net sales by average receivables.
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accounts receivable turnover rate
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the process of classifying accounts receivable by age groups such as current, 1-30 days pas due. a step in estimating the uncollectible portion of the accounts receivable.
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aging the accounts receivable
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a valuation account or contra-asset account relating to accounts receivable and showing the portion of the receivables estimated to be uncollectible
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Allowance for Doubtful Accounts
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an analysis that explains the difference between the balance of cash shown in the bank statement and the balance of cash shown in the depositor's records.
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bank reconciliation
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very short-term investments that are so liquid that they are considered eequivalent to cash. exs money market funds, U.S. treasury bills
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cash equivalents
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planning, controlling, and accounting for cash transacitons and cash balances
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cash management
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a minimum average balance that a bank may require a borrower to leave on deposit in a non-interest-bearing account
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compensating balance
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failure to pay interest or principal of a promissory note at the due date
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defualt
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a method of accounting for uncollectible receivables in which no expense is recognized until individual accounts are determined to be worthless
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direct write off method
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transactions in which a business either sells its accounts receivalbe to a financial institution or borrows money by pledging its accountss receivalbe as collateral.
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factoring
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cash and assets convertible directly into known amounts of cash
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financial assets
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a prearranged borrowing agreement in which a band stands ready to advance the borrower without delay any amount up to a specified creadit limit
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line of credit
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highly liquid investments, primarily in stock and bonds, that can be quoted market prices in organized securities exchanges
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marketable securities
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the balance sheet valuation standard applied to invesments in marketable securities. involvles adjusting the ocntrol account for securities owned to it toal market value at each balance sheet date
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mark-to-market
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the date on which a note becomes due and payable
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maturity date
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the balance sheet valuation standard applied to receivables. equal to the gross amount of accounts and notes receivables, less an estimate of the portion that may prove to be uncollectible
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net realizable value
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a customer's check that was deposited but not returned because of a lack of funds in the account on which the check was drawn
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NSF check
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a stockholders equity account representing the difference between the cost of investments owned and their market value at the balance sheet date. in short gains or losses on these investments that have not been realized through the sale of the securities
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Unrealized Holding Gain (or Loss) on Investments
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asumption as to the sequence in which units are removed from inventory for the purpose of sale.
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cost flow assumption
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units of merchandise acquired at the same unit cost. an inventory comprised of several cost layers is characteristic of all inventory valuation mehtods except average cost
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cost layer
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the cost of merchandise expressed as a percentage of its retail selling price.
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cost ratio
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a method of computing the cost of inventory and the COGS based on the assumption that the first merchandise acquired is the first merchandise sold and that the ending inventory consists of the most recently acquired goods
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FIFO
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a term meaning the seller bears the cost of shipping goods to the buyers location
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FOB destination
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the buy of goods bears the cost of transportation from the sellars location tot he buyers location
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FOB shipping point
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a method of estimating the cost of the ending inventory based on the assumption that the rate of gross profit remains approximately the same from year to year
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gross profit method
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the COGS divided by the average amount of inventory. indicates how man times the average inventory is sold during the course of a year
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inventory turnover
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a method of computing the COGS by use of the prices paid for the most recently acquired units.
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LIFO
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a theod of inventory pricing in which goods are valued at original cost or replacement cost (market), whichever is lower
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LCM rule
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method of valuing all units of inventory at the same average per-unit cost, recalculating this cost after each purchase. this method is used in a perpetual inventory system
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moving average method
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method of estimating the COGS and ending inventory, the cost ratio is based on current cost-to-retail price relationships that than those of prior years
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retail method
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losses of inventory resulting from theft, spoilage, or breakage
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shrinkage losses
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recording as the COGS the actual costs of the specific units sold. necessary if each unit in inventory in unique, but not if the inventory consist of homogeneous products
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specific identification
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a reduction in the carrying amount of an asses because it has become obsolete or its usefullness has otherwise been impaired.
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write-down
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methods of depreciation that call for recognition fo relatively large amounts of drpreciation in the early years of an assets useful life and relatively small amounts in the later years
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accelerated depreciation
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the systematic write-off to expense of the cost of an intangible asset over the periods of its economic usefulness
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amortization
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the cost of a plant asset nimus the total recorded depreciation, as shown by the accumulated depreciation account
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book value
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cost incurred to acquire a long-lived asses. expenditures that will benefit several accounting periods
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capital expenditures
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allocating the cost of a natural resource to the units removed as the resource is mined, pumped, cut...
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depletion
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the systematic allocation of the cost of an assest to expense over the years of its estimated useful life
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depreciation
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an accelerated method of depreciation in which the rate is a multiple of the straight-line rate and is applied each year to the undepreciated cost of the asset.
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fixed-percentage-of-declining-balance depreciation
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the present value of expected furture earnings of a business in excess of the earnings normally realized in the industry. recored when a business entity is purchased at price in excess of the fair value of its net identifiable assets less liabilities
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goodwill
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the practice of taking six month's depreciation in the year acquisition and in the year of disposition, rather than computing deprciation for partial periods to the nearest month
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half-year convention
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writing down a long-lived asset for the difference between its carrying amount less its fair value
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impairment loss
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those assets that are used in the operation of a business but have no physical substance and are noncurrent
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intangible assets
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the accelerated depreciation method permited in federal income tax returns for assets aquired after december. depreciation is based on prescribed recovery periods and depreciation rates.
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MACRS
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total of all assets minus liabilities
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net identifiable assets
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a charge against earnings-either an expense or a loss-that does no require a cash expenditure at or near the time of recognition
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noncash charge or expense
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long lived assets that are acquired for use in business operations rather than for resale to customers
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plant assets
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the portion of an assets cost expected to be recovered through sale or trade in of the asset at the end of its useful life
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residual value
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expenditures that will benefit only the current accounting period
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revenue expenditures
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a method of depreciation that allocates the cost of an asset (minus any residual value) equally to each year of its useful life
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straight-line depreciation
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plant assets that have physical substance but that are not natural resources. ex landd building
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tangible plant assets
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a depreciation method in which cost (minus residual value) is divided by the estimated units of lifetime output. the unit depreciation cost is multiplied by the actual units of output each year to compute the annual depreciation expense
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units of output
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