Acct 3

Card Set Information

Acct 3
2011-03-01 22:59:12
Accounting Exam

Accounting Exam 3 Material
Show Answers:

  1. Corporate Governance
    Refers to the procedures designed to ensure that the company is managed in the interests of the shareholders.
  2. Unqualified (clean) Audit Opinion
    is an auditors statement that the financial statements are prensentations in all material respects in conformity with GAAP.
  3. Relevant Information
    Can influence a desicion; it is timely and has predictive and/or feedback value.
  4. Reliable Information
    is accurate, unbiased and verifiable.
  5. Consistent Information
    Can be compared over time because similar accounting methods have been applied.
  6. Comparable Information
    allows comparisons across business because similar accounting methods have been applied.
  7. Conservatism
    suggests that care should be taken not to overstate assets and revenues and understate liablities and expenses.
  8. Form 10-K
    Form 10-Q
    Form 8-K
    • 10-K Annual
    • 10-Q Quaterly
    • 8-K Any material event
  9. Additional Paid-In Capital
    (Paid-in Capital, Contributed Capital in excess of Par) is the amount of Contributed Capital less the Par value of the stock.
  10. Gross Profit
    (Gross Margin)
    is Net Sales less cost of goods sold.
  11. Income from Operations
    (Operating Income)
    equals Net Sales less cost of goods sold and other operating expenses.
  12. Income Before Taxes
    (Pre-tax Earnings)
    is revenues minus all expenses except income tax expense.
  13. Return on Assets
    Net Income / Average Total Assets
  14. Credit Card Discount
    is the fee charged by the credit card company for its services.
  15. Sales Discount
    (cash discount) is a cash discount offered to encourage prompt payment of an account receivable.
  16. Sales Returns and Allowances
    is a reduction of sales revenues for return of or allowances for unsatisfactory goods.
  17. Gross Profit Percentage
    Gross Profit / Net Sales
  18. Allowance Method
    bases bad debt expense on an estimate of uncollectible accounts
  19. Bad Debt Expense
    is the expense associated with estimated uncollectible accounts receivable.
  20. Allowance for Doubtful Accounts
    is a contra-asset account containing the estimated uncollectible accounts receivable.
  21. Percentage of Credit Sales Method
    bases bad debt expense on the historical percentage of credit sales that result in bad debts.
  22. Aging of Accounts Receivable Method
    estimates uncollectible accounts based on the age of each account receivable.
  23. Receivables Turnover Ratio
    Net Sales / Average Net Trade Accounts Receivable

    Average Collection Period = 365 / Receivables Turnover
  24. Cash Equivalents
    are short-term investments with original maturities of three months or less that are readily convertible to cash a whose value is unlikely to change.