accounting test 2

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accounting test 2
2014-10-25 18:08:21
ualbany manico

chapters 4-7 definitions
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  1. acid-test ratio
    Ratio used to assess a company's ability to settle its current debts with its most liquid assets; defined as quick assets (cash, short-term investments, and current receivables) divided by current liabilities
  2. cash discount
    Reduction in the price of merchandise granted by a seller to a buyer when payment is made within the discount period
  3. cost of goods sold
    Cost of inventory sold to customers during a period; also called; cost of sales
  4. Credit memorandum
    Notification that the sender has credited the recipient's account in the sender's records
  5. credit period
    Time period that can pass before a customer's payment is due
  6. credit terms
    Description of the amounts and timing of payments that a buyer (debtor) agrees to make in the future
  7. Debit memorandum
    Notification that the sender has debited the recipient's account in the sender's records
  8. discount period
    Time period in which a cash discount is available and the buyer can make a reduced payment
  9. EOM
    Abbreviation for end of month;  used to describe credit terms for credit transactions
  10. FOB
    abbreviation for free on board; the point when ownership of goods passes to the buyer; FOB shipping point (or factory) means the buyer pays shipping costs and accepts ownership of goods when the seller transfers goods to carrier; FOB destination means the seller pays shipping costs and buyer accepts ownership of goods at the buyer's place of business
  11. General and administrative expenses
    Expenses that support the operating activities of a business
  12. Gross margin ratio
    Gross margin (net sales minus cost of goods sold) divided by net sales; also called gross profit ratio
  13. gross profit
    Net sales minus cost of goods sold; also called gross margin
  14. inventory
    Goods a company owns and expects to sell in its normal operations
  15. list price
    Catalog (full) price of an item before any trade discount is deducted
  16. merchandise inventory
    Goods that a company owns and expects to sell to customers; also called merchandise or inventory
  17. merchandiser
    Entity that earns net income by buying and selling merchandise
  18. Multiple-step income statement
    Income statement format that shows subtotals between sales and net income, categorizes expenses, and often reports the details of net sales and expenses
  19. Periodic inventory system
    Method that records the cost of inventory purchased but does not continuously track the quantity available or sold to customers; records are updated at the end of each period to reflect the physical count and costs of goods available
  20. purchase discount
    Term used by a purchaser to describe a cash discount granted to the purchaser for paying within the discount period
  21. Retailer
    Intermediary that buys products from manufacturers or wholesalers and sells them to consumers
  22. sales discount
    Term used by a seller to describe a cash discount granted to buyers who pay within the discount period
  23. selling expenses
    Expenses of promoting sales, such as displaying and advertising merchandise, making sales, and delivering goods to customers
  24. shrinkage
    Inventory losses that occur as a result of theft or deterioration
  25. Single-step income statement
    Income statement format that includes cost of goods sold as an expense and shows only one subtotal for total expenses
  26. supplementary records
    Information outside the usual accounting records; also called supplemental records
  27. trade discount
    Reduction from a list or catalog price that can vary for wholesalers, retailers, and consumers
  28. wholesaler
    Intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers
  29. conservatism constraint
    Principle that prescribes the less optimistic estimate when two estimates are about equally likely
  30. consignee
    Receiver of goods owned by another who holds them for purposes of selling them for the owner
  31. consignor
    Owner of goods who ships them to another party who will sell them for the owner
  32. consistency concept
    Principle that prescribes use of the same accounting method(s) over time so that financial statements are comparable across periods
  33. days' sales in inventory
    Estimate of number of days needed to convert inventory into receivables or cash; equals ending inventory divided by cost of goods sold and then multiplied by 365; also called days' stock on hand
  34. First-in, first out (FIFO)
    Method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are the first sold
  35. gross profit method
    Procedure to estimate inventory by using the past gross profit rate to estimate cost of goods sold, which is then subtracted from the cost of goods available for sale
  36. inventory turnover
    Number of times a company's average inventory is sold during a period; computed by dividing cost of goods sold by average inventory; also called merchandise turnover
  37. last-in, first-out (LIFO)
    Method for assigning cost to inventory that assumes costs for the most recent items purchased are sold first and charged to cost of goods sold
  38. lower of cost or market (LCM)
    Required method to report inventory at market replacement cost when that market cost is lower than recorded cost
  39. net realizable value
    Expected selling price (value) of an item minus the cost of making the sale
  40. retail inventory method
    Method for estimating ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail
  41. specific identification
    Method for assigning cost to inventory when the purchase cost of each item in inventory is identified and used to compute cost of inventory
  42. weighted average
    Method for assigning inventory cost to sales; the cost of available-for-sale units is divided by the number of units available to determine per unit cost prior to each sale that is then multiplied by the units sold to yield the cost of that sale
  43. Bank reconciliation
    Report that explains the difference between the book (company) balance of cash and the cash balance reported on the bank statement
  44. bank statement
    Bank report on the depositor's beginning and ending cash balances, and a listing of its changes, for a period
  45. canceled checks
    Checks that the bank has paid and deducted from the depositor's account
  46. cash
    Includes currency, coins, and amounts on deposit in bank checking or savings accounts
  47. cash equivalents
    Short-term, investment assets that are readily convertible to a known cash amount or sufficiently close to their maturity date (usually within 90 days) so that market value is not sensitive to interest rate changes
  48. cash over and short
    Income statement account used to record cash overages and cash shortages arising from errors in cash receipts or payments
  49. check
    Document signed by a depositor instructing the bank to pay a specified amount to a designated recipient
  50. check register
    Another name for a cash disbursements journal when the journal has a column for check numbers
  51. Committee of Sponsoring Organizations (COSO)
    Committee of Sponsoring Organizations of the Treadway Commission (or COSO) is a joint initiative of five private sector organizations and is dedicated to providing thought leadership through the development of frameworks and guidance on enterprise risk management, internal control, and fraud deterrence.
  52. days' sales uncollected
    Measure of the liquidity of receivables computed by dividing the current balance of receivables by the annual credit (or net) sales and then multiplying by 365; also called days' sales in receivables
  53. deposit ticket
    Lists items such as currency, coins, and checks deposited and their corresponding dollar amounts
  54. deposits in transit
    Deposits recorded by the company but not yet recorded by its bank
  55. discounts lost
    Expenses resulting from not taking advantage of cash discounts on purchases
  56. Electronic funds transfer (EFT)
    Use of electronic communication to transfer cash from one party to another
  57. gross method
    Method of recording purchases at the full invoice price without deducting any cash discounts
  58. Internal controls or Internal control system
    All policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies
  59. invoice
    Itemized record of goods prepared by the vendor that lists the customer's name, items sold, sales prices, and terms of sale
  60. invoice approval
    Document containing a checklist of steps necessary for approving the recording and payment of an invoice; also called check authorization
  61. liquid assets
    Resources such as cash that are easily converted into other assets or used to pay for goods, services, or liabilities
  62. liquidity
    Availability of resources to meet short-term cash requirements
  63. net method
    Method of recording purchases at the full invoice price less any cash discounts
  64. outstanding checks
    Checks written and recorded by the depositor but not yet paid by the bank at the bank statement date
  65. petty cash
    Small amount of cash in a fund to pay minor expenses; accounted for using an imprest system
  66. Principles of internal control
    Principles prescribing management to establish responsibility, maintain records, insure assets, separate recordkeeping from custody of assets, divide responsibility for related transactions, apply technological controls, and perform reviews
  67. purchase order
    Document used by the purchasing department to place an order with a seller (vendor)
  68. Purchase requisition
    Document listing merchandise needed by a department and requesting it be purchased
  69. Receiving report
    Form used to report that ordered goods are received and to describe their quantity and condition
  70. Sarbanes-Oxley Act (SOX)
    Created the Public Company Accounting Oversight Board, regulates analyst conflicts, imposes corporate governance requirements, enhances accounting and control disclosures, impacts insider transactions and executive loans, establishes new types of criminal conduct, and expands penalties for violations of federal securities laws
  71. signature card
    Includes the signatures of each person authorized to sign checks on the bank account
  72. vendee
    Buyer of goods or services
  73. vendor
    seller of good or services
  74. voucher
    Internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded
  75. voucher register
    Journal (referred to as book of original entry) in which all vouchers are recorded after they have been approved
  76. voucher system
    Procedures and approvals designed to control cash disbursements and acceptance of obligations
  77. accounts receivable
    Amounts due from customers for credit sales; backed by the customer's general credit standing
  78. accounts recievable turnover
    Measure of both the quality and liquidity of accounts receivable; indicates how often receivables are received and collected during the period; computed by dividing net sales by average accounts receivable
  79. aging of accounts receivable
    Process of classifying accounts receivable by how long they are past due for purposes of estimating uncollectible accounts
  80. Allowance for Doubtful Accounts
    Contra asset account with a balance approximating uncollectible accounts receivable; also called Allowance for Uncollectible Accounts
  81. Allowance method
    Procedure that (a) estimates and matches bad debts expense with its sales for the period and/or (b) reports accounts receivable at estimated realizable value
  82. bad debts
    Accounts of customers who do not pay what they have promised to pay; an expense of selling on credit; also called uncollectible accounts
  83. Direct write-off method
    Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts
  84. interest
    Charge for using money (or other assets) loaned from one entity to another
  85. maker of the note
    Entity who signs a note and promises to pay it at maturity
  86. Matching (or expense recognition) principle
    Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses
  87. Materiality constraint
    Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP
  88. Maturity date of a note
    Date when a note's principal and interest are due
  89. Payee of the note
    Entity to whom a note is made payable
  90. Principal of a note
    Amount that the signer of a note agrees to pay back when it matures, not including interest
  91. promissory note
    Written promise to pay a specified amount either on demand or at a definite future date; is a note receivable for the lender but a note payable for the lendee
  92. realizable value
    Expected proceeds from converting an asset into cash