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Accounting Chp 4
Terms
| Term | Definition |
|---|---|
| Accounting cycle | Recurring steps performed each accounting period, starting with analyzing transactions and continuing through the post closing trial balance (or revering entries). |
| Classified balance sheet | Balance sheet that presents assets and liabilities in relevant subgroups, including current and noncurrent classifications. |
| Closing Entries | Entries recorded at the end of each accounting period to transfer end-of-period balances in revenue, gain, expense, loss, and withdrawal (dividend for a corporation) accounts to the capital account (to retained earnings for a corporation). |
| Closing Process | Necessary end-of-period steps to prepare the accounts for recording the transactions of the next period. |
| Current Assets | Cash and other assets expected to be sold, collected, or used within one year or the company’s operating cycle, whichever is longer. |
| Current Liabilities | Obligations due to be paid or settled within one year of the company’s operating cycle, whichever is longer. |
| Current Ratio | Ratio used to evaluate a company’s ability to pay its short-term obligations, calculated by dividing current assets by current liabilities. |
| Income Summary | Temporary account used only in the closing process to which the balances of revenue and expense accounts (including any gains or losses) are transferred. |
| Intangible Assets | Long-term assets (resources) used to produce or sell products or services; usually lack physical form and have uncertain benefits. |
| Long-term investments | Long-term assets not used in operating activities such as notes receivable and investments in stocks and bonds. |
| Long-term liabilities | Obligations not due to be paid within one year or the operating cycle, whichever is longer. |
| Operating cycle | Normal time between paying cash for merchandise or employee services and receiving cash from customers. |
| Permanent Accounts | Accounts that reflect activities related to one or more future periods; balance sheet accounts whose balances are not closed (also called real accounts) |
| Post-Closing trial balance | List of permanent accounts and their balances from the ledger after all closing entries are journalized and posted. |
| Pro forma financial statements | Statements that show the effects of proposed transactions and events as if they had occurred. |
| Reversing Entries | Optional entries recorded at the beginning of a period that prepare the accounts for the usual journal entries as if adjusting entries had not occurred in the prior period. |
| Temporary Accounts | Accounts used to record revenues, expenses, and withdrawals, (dividends for a corporation); they are closed at the end of each period; also called nominal accounts. |
| Unclassified balance sheets | Balance sheet that broadly groups assets, liabilities, and equity accounts. |
| Working papers | Analyses and other informal reports prepared by accountants and managers when organizing information for formal reports and financial statements. |
| Work Sheet | Spreadsheet used to draft an unadjusted trial balance, adjusting entries, adjusted trial balance and financial statements. |
Created by:
Posiniv01
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