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ACCT 2000 > Exam 2 Vocab > Flashcards

Exam 2 Vocab Flashcards

1
Q

Accounting basis in which companies record, in the periods in which the events occur, transactions that change a company’s financial statements, even if cash was not exchanged.

A

Accrual-basis accounting

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2
Q

Expenses incurred but not yet paid in cash or recorded.

A

Accrued expenses

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3
Q

Revenues for services performed but not yet received in cash or recorded.

A

Accrued revenues

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4
Q

A list of accounts and their balances after all adjustments have been made.

A

Adjusted trial balance

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5
Q

Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.

A

Adjusting entries

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6
Q

The difference between the cost of a depreciable asset and its related accumulated depreciation.

A

Book value

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7
Q

Accounting basis in which a company records revenue only when it receives cash and an expense only when it pays cash.

A

Cash-basis accounting

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8
Q

Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders’ equity account, Retained Earnings.

A

Closing entries

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9
Q

An account that is offset against an asset account on the balance sheet.

A

Contra asset account

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10
Q

The process of allocating the cost of an asset to expense over its useful life.

A

Depreciation

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11
Q

The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income.

A

Earnings management

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12
Q

The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues.

A

Expense recognition principle (matching principle)

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13
Q

An accounting period that is one year long.

A

Fiscal year

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14
Q

A temporary account used in closing revenue and expense accounts.

A

Income Summary

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15
Q

An assumption that the economic life of a business can be divided into artificial time periods.

A

Periodicity assumption

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16
Q

Balance sheet accounts whose balances are carried forward to the next accounting period.

A

Permanent accounts

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17
Q

A list of permanent accounts and their balances after a company has journalized and posted closing entries.

A

Post-closing trial balance

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18
Q

Expenses paid in cash before they are used or consumed.

A

Prepaid expenses (prepayments)

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19
Q

Indicates the level of full and transparent information that a company provides to users of its financial statements.

A

Quality of earnings

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20
Q

The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.

A

Revenue recognition principle

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21
Q

An entry made at the beginning of the next accounting period; the exact opposite of the adjusting entry made in the previous period.

A

Reversing entry

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22
Q

Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period.

A

Temporary accounts

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23
Q

Cash received and a liability recorded before services are performed.

A

Unearned revenues

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24
Q

The length of service of a productive asset.

A

Useful life

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25
Q

A multiple-column form that companies may use in the adjustment process and in preparing financial statements.

A

Worksheet

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26
Q

The total cost of merchandise sold during the period.

A

Cost of goods sold

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27
Q

An account that is offset against a revenue account on the income statement.

A

Contra revenue account

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28
Q

The excess of net sales over the cost of goods sold.

A

Gross profit

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29
Q

Gross profit expressed as a percentage by dividing the amount of gross profit by net sales.

A

Gross profit rate

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30
Q

Sales less sales returns and allowances and sales discounts.

A

Net sales

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31
Q

An inventory system in which a company does not maintain detailed records of goods on hand throughout the period and determines the cost of goods sold only at the end of an accounting period.

A

Periodic inventory system

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32
Q

A detailed inventory system in which a company maintains the cost of each inventory item, and the records continuously show the inventory that should be on hand.

A

Perpetual inventory system

33
Q

Measures the percentage of each dollar of sales that results in net income, computed by dividing net income by net sales.

A

Profit margin

34
Q

A deduction made to the selling price of merchandise, granted by the seller, so that the buyer will keep the merchandise.

A

Purchase allowance

35
Q

A cash discount claimed by a buyer for prompt payment of a balance due.

A

Purchase discount

36
Q

A document that provides support for each purchase.

A

Purchase invoice

37
Q

A return of goods from the buyer to the seller for cash or credit.

A

Purchase return

38
Q

A measure used to indicate the extent to which a company’s earnings provide a full and transparent depiction of its performance; computed as net cash provided by operating activities divided by net income.

A

Quality of earnings ratio

39
Q

A reduction given by a seller for prompt payment of a credit sale.

A

Sales discount

40
Q

A document that provides support for each sale.

A

Sales invoice

41
Q

Transactions in which the seller either accepts goods back from the purchaser (a return) or grants a reduction in the purchase price (an allowance) so that the buyer will keep the goods.

A

Sales returns and allowances

42
Q

Primary source of revenue for a merchandising company.

A

Sales revenue

43
Q

An inventory costing method that uses the weighted-average unit cost to allocate the cost of goods available for sale to ending inventory and cost of goods sold

A

Average-cost method

44
Q

Goods held for sale by one party although ownership of the goods is retained by another party.

A

Consigned goods

45
Q

The cost of purchasing the same goods at the present time from the usual suppliers in the usual quantities.

A

Current replacement cost

46
Q

Measure of the average number of days inventory is held; calculated as 365 divided by inventory turnover.

A

Days in inventory

47
Q

Manufactured items that are completed and ready for sale.

A

Finished goods inventory

48
Q

An inventory costing method that assumes that the earliest goods purchased are the first to be sold.

A

First-in, first-out (FIFO) method

49
Q

Freight terms indicating that ownership of goods remains with the seller until the goods reach the buyer.

A

FOB destination

50
Q

Freight terms indicating that ownership of goods passes to the buyer when the public carrier accepts the goods from the seller.

A

FOB shipping point

51
Q

A ratio that indicates the liquidity of inventory by measuring the number of times average inventory sold during the period; computed by dividing cost of goods sold by the average inventory during the period.

A

Inventory turnover

52
Q

Inventory system in which companies manufacture or purchase goods just in time for use.

A

Just-in-time (JIT) inventory

53
Q

An inventory costing method that assumes that the latest units purchased are the first to be sold.

A

Last-in, first-out (LIFO) method

54
Q

For a company using LIFO, the difference between inventory reported using LIFO and inventory using FIFO.

A

LIFO reserve

55
Q

A basis whereby inventory is stated at the lower of either its cost or its market value as determined by current replacement cost.

A

Lower-of-cost-or-market (LCM)

56
Q

Basic goods that will be used in production but have not yet been placed in production.

A

Raw materials

57
Q

An actual physical-flow costing method in which particular items sold and items still in inventory are specifically costed to arrive at cost of goods sold and ending inventory.

A

Specific identification method

58
Q

Average cost that is weighted by the number of units purchased at each unit cost.

A

Weighted-average unit cost

59
Q

That portion of manufactured inventory that has begun the production process but is not yet complete.

A

Work in process

60
Q

The process of comparing the bank’s account balance with the company’s balance, and explaining the differences to make them agree.

A

Bank reconciliation

61
Q

A statement received monthly from the bank that shows the depositor’s bank transactions and balances.

A

Bank statement

62
Q

Obtaining insurance protection against theft by employees.

A

Bonding

63
Q

Resources that consist of coins, currency, checks, money orders, and money on hand or on deposit in a bank or similar depository.

A

Cash

64
Q

A projection of anticipated cash flows, usually over a one- to two-year period.

A

Cash budget

65
Q

Short-term, highly liquid investments that can be readily converted to a specific amount of cash and which are relatively insensitive to interest rate changes.

A

Cash equivalents

66
Q

Deposits recorded by the depositor that have not been recorded by the bank.

A

Deposits in transit

67
Q

A disbursement system that uses wire, telephone, or computer to transfer cash from one location to another.

A

Electronic funds transfer (EFT)

68
Q

A dishonest act by an employee that results in personal benefit to the employee at a cost to the employer.

A

Fraud

69
Q

The three factors that contribute to fraudulent activity by employees: opportunity, financial pressure, and rationalization.

A

Fraud triangle

70
Q

Company employees who continuously evaluate the effectiveness of the company’s internal control systems.

A

Internal auditors

71
Q

All the related methods and measures adopted within an organization to safeguard assets and enhance the reliability of accounting records, increase efficiency of operations, and ensure compliance with laws and regulations.

A

Internal control

72
Q

A check that is not paid by a bank because of insufficient funds in a bank account.

A

NSF check

73
Q

Checks issued and recorded by a company that have not been paid by the bank.

A

Outstanding checks

74
Q

A cash fund used to pay relatively small amounts.

A

Petty cash fund

75
Q

Cash that is not available for general use but instead is restricted for a particular purpose.

A

Restricted cash

76
Q

Law that requires publicly traded companies to maintain adequate systems of internal control.

A

Sarbanes-Oxley Act (SOX)

77
Q

Employee responsible for the management of a company’s cash.

A

Treasurer

78
Q

An authorization form prepared for each expenditure in a voucher system.

A

Voucher

79
Q

A network of approvals by authorized individuals, acting independently, to ensure that all disbursements by check are proper.

A

Voucher system

ACCT 2000 (10 decks)

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