Accounting 201Chapter 08 Key Words Flashcards
(20 cards)
Acid-test ratio
Cash, current investments, and accounts receivable divided by current liabilities; measures the availability of liquid current assets to pay current liabilities.
Commercial paper
Borrowing from another company rather than from a bank.
Contingencies
Uncertain situations that can result in a gain or a loss for a company.
Contingent gain
An existing uncertain situation that might result in a gain.
Contingent liability
An existing uncertain situation that might result in a loss.
Current liabilities
Debts that, in most cases, are due within one year. However, when a company has an operating cycle of longer than a year, its current liabilities are defined by the length of the operating cycle, rather than by the length of one year.
Current portion of long-term debt
Debt that will be paid within the next year.
Current ratio
Current assets divided by current liabilities; measures the availability of current assets to pay current liabilities.
Debt covenant
An agreement between a borrower and a lender that requires that certain minimum financial measures be met or the lender can recall the debt.
FICA taxes
Based on the Federal Insurance Contribution Act; tax withheld from employees’ paychecks and matched by employers for Social Security and Medicare.
Fringe benefits
Additional employee benefits paid for by the employer.
Liability
A present responsibility to sacrifice assets in the future due to a transaction or other event that happened in the past.
Line of credit
An informal agreement that permits a company to borrow up to a prearranged limit without having to follow formal loan procedures and prepare paperwork.
Liquidity
Having sufficient cash (or other assets convertible to cash in a relatively short time) to pay currently maturing debts. Refers to a company’s ability to pay its current liabilities.
Notes payable
Written promises to repay amounts borrowed plus interest.
Quick assets
Includes only cash, current investments, and accounts receivable.
Sales tax payable
Sales tax collected from customers by the seller, representing current liabilities payable to the government.
Unearned revenue
A liability account used to record cash received in advance of the sale or service.
Unemployment taxes
A tax to cover federal and state unemployment costs paid by the employer on behalf of its employees.
Working capital
The difference between current assets and current liabilities
