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Flashcards in Final Deck (32):
1

Current Liability

debt that a company reasonably expects to pay 1. from existing current asset or through the creation other current liabilities and 2. within one year or operating cycle

2

Notes payable

companies record obligations in the form of promissory notes and usually require the borrower to pay interest.

3

100,000 12% four month note payable
explain journal entry

debit cash for 100,000
Credit notes payable 100,000
THEN...
Interest expense (debit) 4,000
Interest payable (credit) 4,000
THEN... pay value of note plus interest
Notes payable (debit) 100,000
Interest payable (debit) 4,000
Cash (credit) 104,000

4

Sales tax payable

taking a percentage of the sales price

5

Sales tax journal entry example
10,000 sales and sales tax of 600 (sales tax rate of 6%)

Cash debit 10,600
sales revenue credit 10,000
Sales tax payable credit 6,00

6

Unearned revenue

receive payment for service or good that has not yet been deceived or preformed

7

Unearned revenue example
sells 100,000 season football tickets at $50 each for its five-game home schedule
THEN after 1 game is completed

Cash debit 500,000
Unearned ticket revenue credit 500,000
THEN
Unearned ticket revenue debit 100,000
Ticket revenue credit 100,000

8

Payroll taxes

Taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their staff

9

Employer's share

Payroll taxes that goes to Social Security (FICA) taxes and state and federal unemployment taxes.

10

Journal entry for FICA taxes, federal taxes, state taxes

record as payable and credit

11

Bonds

A bond is a fixed obligation to pay that is issued by a corporation or government entity to investors. Bonds are used to raise cash for operational or infrastructure projects. Bonds usually include a periodic coupon payment, and are paid off as of a specific maturity date

12

Secured bonds

specific assets of the issuer pledged as collateral for the bonds

13

unsecured bonds

issued against the general creed of the borrower. Large corporations with good credit ratings use unsecured bonds extensively.

14

Convertible bonds

bonds that can be converted into common stock at the bondholder's option

15

Callable bonds

Bonds that the issuing company can redeem (buy back) at the stated dollar amount prior to maturity

16

Liquidity ratio definition

measure the short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash

17

Liquidity ratio equation

Find current ratio then compare that to :1
(current assets)/(current liabilities) :1
current assets : what they owe
CA exceed CL=positive
CL exceed CA= negative

18

Solvency Ratio

measure the ability of a company to survive over a long period of time

19

solvency ratio equation

debt to assets ratio=(total liabilities/total assets)
Times interested Earned=(Net income + interest expense + tax expense) / interest expense

20

Interest

Payment for the use of another persons money. it is the difference between amount borrowed and the amount repaid or collected

21

simple interest equation

Principle x Rate x Time

22

Compound interest

computed on principal and on any interest earned that has not been paid or withdrawn Occurs when you put in a lump sum of money

23

compound interest formula

FV= P x Future value table

24

Annuities

Series of equal dollar amounts are to be paid or received at evenly spaced time intervals

25

Future value of annuity

Sum of all payments (receipts) PLUS accumulated compound interest on them
Occurs when making payments every year

26

Future value of annuity equation

P x Future value annuity table amount

27

Present value

The value NOW of a given amount to be paid or received in the future, assuming compound interest

28

Present value of an annuity

The value NOW of a series of future receipts or payments, discounted assuming compound interest
making payments

29

present value equation

FV x present value table

30

Present value of an annuity equation

FV x preset value of an annuity table

31

Semiannually

half the year---multiply # of years given by two.
ex: semiannually for 3 years= 6 periods

32

PRESENT VALUE OF LONG TERM NOTE OR BOND???

ASK