CH4 - Completing the Accounting Cycle Flashcards Preview

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Flashcards in CH4 - Completing the Accounting Cycle Deck (18):
1

The process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance.

accounting cycle

2

Another name for the income summary account because it has the effect of clearing the revenue and expense accounts of their balances.

clearing account

3

The entries that transfer the balances of the revenue, expense, and drawing accounts to the owner's capital account.

closing entries

4

The process of transferring temporary accounts balances to permanent accounts at the end of the accounting period.

closing the books

5

Cash and other assets that are expected to be converted to cash or sold or used up, usually within one year or less, through the normal operations of the business.

current assets

6

Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets.

current liabilities

7

A financial ratio that is computed by dividing current assets by current liabilities.

current ratio

8

The annual accounting period adopted by a business.

fiscal year

9

Long-term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.

fixed (plant) assets

10

An account to which the revenue and expense account balances are transferred at the end of a period.

Income Summary

11

The ability to convert assets into cash.

liquidity

12

Liabilities that usually will not be due for more than one year.

long-term liabilities

13

A fiscal year that ends when business activities have reached the lowest point in an annual operating cycle.

natural business year

14

A customer's written promise to pay an amount and possibly interest at an agreed-upon rate.

notes receivable

15

Term for balance sheet accounts because they are relatively permanent and carried forward from year to year.

real (permanent) accounts

16

The ability of a firm to pay its debts as they come due.

solvency

17

Accounts that report amounts for only one period.

temporary (nominal) accounts

18

The excess of the current assets of a business over its current liabilities.

working capital