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Flashcards in Reversed Chapter (4) Deck (19):
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.

account form

3

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

closing entries

4

The transfer process of converting temporary account balances to zero by transferring the revenue and expense account balances to Income Summary; transferring the income summary account balance to the owner’s capital account; and transferring the owner’s drawing account to the owner’s capital account.

closing process

5

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

closing the books

6

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

7

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

8

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

current ratio

9

The annual accounting period adopted by a business.

fiscal year

10

The number of dollars of sales that are generated from each dollar of average fixed assets during the year; computed by dividing the net sales by the average net fixed assets.

fixed assets

11

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

Income Summary

12

The ability to convert assets into cash.

liquidity

13

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

long-term liabilities

14

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

natural business year

15

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

notes receivable

16

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

real accounts

17

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

solvency

18

Accounts that report amounts for only one period.

temporary accounts

19

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

working capital