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VYC1 Acct. 1 Part 2

VYC1 Principles of Accounting WGU Part 2

accrual basis a system of accounting by which all revenues and expenses are matched and reported on financial statements for the applicable period, regardless of when the cash related to the transaction is received or paid
accrued expenses expense items that relate to the current period but have not yet been paid and do not yet appear in the accounting records
accrued income income that has been earned but not yet received and recorded
deferred expenses see prepaid expenses
deferred income see unearned income
inventory sheet a form used to list the volume and type of goods a firm has in stock
net income line the worksheet line immediately following the column totals on which net income (or net loss) is recorded in two places: the Income Statement and the Balance Sheet section
prepaid expenses expenses that are paid for and recorded before they are used, such as rent or insurance
property, plant, and equipment long-term assets that are used in the operation of a business and that are subject to depreciation (except for land, which is not depreciated)
unearned income income received before it is earned
updated account balances the amounts entered in the Adjusted Trial Balance section of the worksheet
classified financial statement a format by which revenues and expenses on the income statement, and assets and liabilities on the balance sheet, are divided into groups of similar accounts and a subtotal is given for each group
current assets assets consisting of cash, items that normally will be converted into cash within one year, or items that will be used up within one year
current liabilities debts that must be paid within one year
current ratio a relationship between current assets and current liabilities that provides a measure of a firm's ability to pay its current debts (current ratio = current assets / current liabilities)
gross profit the different between net sales and the cost of goods sold (gross profit = net sales - cost of goods sold)
gross profit percentage the amount of gross profit from each dollar of sales (sales profit percentage = gross profit / net sales)
inventory turnover the number of times inventory is purchased and sold during the accounting period (inventory turnover = cost of goods sold / average inventory)
liquidity the ease with which an item can be converted into cash
long-term liabilities debts of business that are due more than one year in the future
multiple-step income statement a type of income statement on which several subtotals are computed before the net income is calculated
plant and equipment property that will be used in the business for longer than one year
reversing entries journal entries made to reverse the effect of certain adjusting entries involving accrued income or accrued expenses to avoid problems in recording future payments or receipts of cash in a new accounting period
single-step income statement a type of income statement where only one computation is needed to determine the net income (total revenue - total expenses = net income)
working capital the difference between current assets and current liabilities; it is a measure of the firm's ability to pay current obligations
Start on Chapter 14
Created by: csmi384