Flashcards in Ch 13 - Financials and Closing VOCAB Deck (14):
What is a classified financial statement?
format by which revenues and expenses on income statement, and assets and liabilities on balance sheet, are divided into groups of similar accounts and subtotal is given for each group
Define current assets.
Assets consisting of cash, items that normally will be converted to cash within one year, or items that will be used up within one year.
Define current liabilities.
debts that must be paid within one year.
Define current ratio.
relationship between current assets and current liabilities that provides a measure of a firm's ability to pay its current debts
(current ratio = current assets / current liabilities)
Define gross profit.
difference between net sales and cost of goods sold
(gross profit = net sales - cost of goods sold)
Define gross profit percentage.
amount of gross profit from each dollar of sales
(gross profit percentage = gross profit / net sales)
Define inventory turnover.
number of times inventory is purchased and sold during the accounting period
(inventory turnover = cost of goods sold / average inventory)
Ease with which an item can be converted into cash
Define long-term liabilities.
debts of a business that are due more than one year in the future.
Define multiple-step income statement.
type of income statement on which several subtotals are computed before the net income is calculated
Define plant and equipment.
property that will be used in the business for longer than one year.
Define reversing entries.
Journal entries made to reverse the effect of certain adjusting entries involving accrued income or accrued expenses to avoid problems in recording future payments or receipts of cash in a new accounting period
Define single-step income statement
type of income statement where only one computation is needed to determine the net income
(total revenue - total expenses = net income)