Glossary A

Question 1

Define

accelerated depreciation method

glossary

Answer 1

A depreciation method that provides for a higher depreciation amount in the first year of the asset’s use, followed by a gradually declining amount of depreciation.

glossary

Question 2

Define

account payable

glossary

Answer 2

The liability created by a purchase on account.

glossary

Question 3

Define

account(s) receivable

glossary

Answer 3

The claim against customers created by selling merchandise or services on account, normally collected within a short period and classified as a current asset.

glossary

Question 4

Describe

completion of the accounting cycle

glossary

Answer 4

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

glossary

Question 5

Define

Accounting Standards Codification

glossary

Answer 5

An electronic database maintained by the Financial Accounting Standards Board (FASB) that contains all of the accounting standards that make up the generally accepted accounting principles (GAAP)

glossary

Question 6

Define

account payable

glossary

Answer 6

The liability created by a purchase on account.

glossary

Question 7

Define

Accumulated Depreciation

glossary

Answer 7

The contra asset account credited when recording the depreciation of a fixed asset

glossary

Question 8

Define

accumulated other comprehensive income

glossary

Answer 8

The cumulative effects of other comprehensive income items reported separately in the Stockholders’ Equity section of the balance sheet.

glossary

Question 9

Define

adjusting entries

glossary

Answer 9

The journal entries that bring the accounts up to date at the end of the accounting period.

glossary

Question 10

Define

administrative expenses

glossary

Answer 10

Expenses incurred in the administration or general operations of the business

glossary

Question 11

Define

aging the receivables

glossary

Answer 11

The process of analyzing the accounts receivable and classifying them according to various age groupings, with the due date being the base point for determining age.

glossary

Question 12

Define

Allowance for Doubtful Accounts

glossary

Answer 12

The contra asset account for accounts receivable credited for esti- mated bad debts.

glossary

Question 13

Define

amortizaton

glossary

Answer 13

The periodic transfer of the cost of an intangible asset to expense. (Ch. 10) A portion of a bond discount or bond premium transferred to interest expense over time.

glossary

Question 14

Define

annuity

glossary

Answer 14

A series of equal cash flows at fixed intervals.

glossary

Question 15

Define

asset turnover

glossary

Answer 15

A measure of how effectively a busi- ness is using its assets to generate sales, computed as sales divided by average total assets.

glossary

Question 16

Define

available-for-sale securities

glossary

Answer 16

Securities that manage- ment expects to sell in the future but not in the near term.

glossary