Glossary B-C

Question 1

Define

bad debt expense

glossary

Answer 1

The operating expense incurred because of the failure to collect receivables.

glossary

Question 2

Define

balance sheet

glossary

Answer 2

a statement of the assets, liabilities, and capital of a business or other organization at a particular point in time

glossary

Question 3

Define

bank reconciliation

glossary

Answer 3

The analysis that details the items responsible for the difference between the cash balance reported in the bank statement and the balance of the cash account in the ledger.

glossary

Question 4

Define

bond

glossary

Answer 4

An interest-bearing note that requires periodic interest payments, with the face amount to be repaid at the maturity date.

glossary

Question 5

Define

bond indenture

glossary

Answer 5

The contract between a corporation issuing bonds and the bondholders

glossary

Question 6

Define

book value of the asset

glossary

Answer 6

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

glossary

Question 7

Define

boot

glossary

Answer 7

The amount a buyer owes a seller when a fixed asset is traded in on a similar asset.

glossary

Question 8

Define

business entity concept

glossary

Answer 8

A concept of accounting that limits the economic data in the accounting system to data related directly to the activities of the business

glossary

Question 9

Define

capital account

glossary

Answer 9

An account used for a proprietorship that represents the owner’s equity.

glossary

Question 10

Define

capital expenditures

glossary

Answer 10

The costs of acquiring fixed assets, adding to a fixed asset, improving a fixed asset, or extending a fixed asset’s useful life.

glossary

Question 11

Define

carrying amount

glossary

Answer 11

The book value of bonds payable, computed as the face amount less any unamortized discount or plus any unamortized premium.

glossary

Question 12

Define

cash basis of accounting

glossary

Answer 12

A basis of accounting in which revenues and expenses are reported on the income statement in the period in which cash is received or paid.

glossary

Question 13

Define

cash equivalents

glossary

Answer 13

Highly liquid investments that are usually reported with cash on the balance sheet.

glossary

Question 14

Define

cash flow per share

glossary

Answer 14

The net cash flows from operat- ing activities divided by the number of common shares outstanding.

glossary

Question 15

Define

cash flows from (used for) financing activities

glossary

Answer 15

The section of the statement of cash flows that reports cash flows from transactions affecting the equity and debt of the business.

glossary

Question 16

Define

cash flows from (used for) investing activities

glossary

Answer 16

The section of the statement of cash flows that reports cash flows from transactions affecting investments in noncurrent assets.

glossary

Question 17

Define

cash flows from (used for) operating activities

glossary

Answer 17

The section of the statement of cash flows that reports the cash transactions affecting the determination of net income.

glossary

Question 18

Define

cash short and over account

glossary

Answer 18

An account which has recorded errors in cash sales or errors in making change causing the amount of actual cash on hand to differ from the beginning amount of cash plus the cash sales for the day.

glossary

Question 19

Define

chart of accounts

glossary

Answer 19

A list of the accounts in the ledger.

glossary

Question 20

Define

closing entries

glossary

Answer 20

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

glossary

Question 21

Define

closing process

glossary

Answer 21

The transfer process of converting temporary account balances to zero by transferring the revenue and expense account balances to the owner’s capital account, and transferring the owner’s drawing account balance to the owner’s capital account.

glossary

Question 22

Define

closing the books

glossary

Answer 22

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

glossary

Question 23

Define

common stock

glossary

Answer 23

The stock outstanding when a corporation has issued only one class of stock.

glossary

Question 24

Define

common-sized statement

glossary

Answer 24

A financial statement in which all items are expressed as percentages, with no dollar amounts shown.

glossary

Question 25

# Define compensating balance | glossary

Answer 25

A requirement by some banks requiring depositors to maintain minimum cash balances in their bank accounts. | glossary

Question 26

# Define comprehensive income | glossary

Answer 26

All changes in stockholders’ equity during a period, except those resulting from dividends and stockholders’ investments. | glossary

Question 27

# Define consolidated financial statements | glossary

Answer 27

Financial statements resulting from combining parent and subsidiary statements. | glossary

Question 28

# Define contingent liabilties | glossary

Answer 28

Liabilities that may arise from past transactions if certain events occur in the future. | glossary

Question 29

# Define contra accounts | glossary

Answer 29

An account offset against another account. | glossary

Question 30

# Define controling account | glossary

Answer 30

The account in the general led- ger that summarizes the balances of the accounts in a subsidiary ledger. | glossary

Question 31

# Define corporation | glossary

Answer 31

A business organized under state or federal statutes as a separate business entity. | glossary

Question 32

# Define cost concept | glossary

Answer 32

A concept of accounting that determines the amount initially entered into the accounting records for purchases. | glossary

Question 33

# Define cost method | glossary

Answer 33

A method of accounting for bond invest- ments in which the purchase is recorded at original cost, including any fees charged by a broker in acquiring the bonds, and any accrued interest is recorded separately. | glossary

Question 34

# Define cost of merchandise sold | glossary

Answer 34

The cost of merchandise inventory that is reported as an expense when merchandise is sold; on the income statement of a merchandising business, determined by subtracting ending merchandise inventory from the cost of merchandise available for sale. | glossary

Question 35

# Define credit | glossary

Answer 35

Amount entered on the right side of an account. | glossary

Question 36

# Define credit memorandum | glossary

Answer 36

A form used by a seller to inform the buyer of the amount the seller proposes to credit to the account receivable due from the buyer | glossary

Question 37

# Define credit period | glossary

Answer 37

The amount of time the buyer is allowed in which to pay the seller. | glossary

Question 38

# Define cumulative preferred stock | glossary

Answer 38

Stock that has a right to receive regular dividends that were not declared (paid) in prior years. | glossary

Question 39

# Define current assets | glossary

Answer 39

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. | glossary

Question 40

# Define current liabilties | glossary

Answer 40

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

Question 41

# Define current ratio | glossary

Answer 41

A financial ratio that measures a company’s ability to pay its current liabilities, computed by dividing current assets by current liabilities. | glossary