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Accounting Terms

Principles of Management

QuestionAnswer
Balance Sheet Specific data, the assets owned by the company, liabilities owned by the company and lenders and accumulated funds the owners have invested.
Income Statement Transaction tht produced revenue for bisiness as a result of selling its products, or service
Net Income Difference in aggregate revenue and aggregate expenses during a specific period
Revenue Business earning or Profit
Expense Payment of Good or Service
Owner Equity Major transations that affect the owner's interest in the company including net income the enterprised earned and the amount of those earning that the owners elected to distribute
Cash Flow Compay's cash funds during the period and the uses the company made of those funds.
Assets Resource
Equity Amount provided by owners
Liabilities Amount provided by creditors
Assets Are tangible or intangible resources that can be measured in dollars, which are owned by the company and can be expected to provide future economic benefits to the company.
Liabilities Dollar measures of the company's obligations to repay monies loaned to it, to pay for goods or services it has received, or to fulfill commitments it has made.
Owners' Equity Owners' investment in the company. Owners can invest directly in a company by exchanging cash or other assets for shares of stock, and they can invest indirectly
Relationship between assets (A), liabilities (L), and owners' equity (OE) A=L+OE (assets of a company will always equal the sum of its liabilities and owners' equity)
Foundation of Accounting Every Resource has a source
Basic acconting equation Balance sheet presents the company's assets in contrast to its liabilities and owners' equity.
Intangibles Assets Copyrights, Patents, Trademarks
Balance Sheet Note 2 Stops all transactions for just a moment and gives us a financial status report of the business at one point in its life.
Balance Sheet Note 3 Assets and liabilities are listed in order of their liquidity
Liquidity Order in which assets are likely to be converted to cash or in which liabilities are likely to demand cash.
Cash includes excess cash, beyond the needs of day-to-day operations, that has been invested on a very short term, very secure basis.
Due to Customers ,or Account Receivable , Trade Receivable Owe to the comany by customers who purchased merchandise but who had not paid for those purchases.
Accrual Accounting for Accounts Payable Compaies record its inventory as an asset just as soon as it owns it or when merchandise is received
Payable to Employees and others Amounts owed by the firm for services rendered
Accrual Accounting for Payable to Others Balance sheet must reflect all obligations owed as of the date of the statement, even if those amounts are not immediately payable.
Taxes Owed Amount the firm estimates will be payable to the federal and state authorities
Payable to debt holders Debt that must be repaid to lenders over the next 12 months.
Long-term debt Borrowed funds that must be repaid beyond the one-year period
Payable to Shareholders Are the dividends on stock that were promised or declared by the company that have yet be paid in cash
Current Liabilities Require the disbursement of cash within the next year are
Current Assets Expected to be used in the business and converted to cash during the next year
Net Current Assets, or Working Capital Measure of the entity's ability to meet its obligations as they come due
Current Ratio ( Current assets / current liablities )
Liquid Company has high current ratio and the ability to liquidate its obligations
Illiquid Negative net current asset
Owners' Equity Amounts that have been received from stockholders in exchange for shares of stock, the amount of profit the entity has earned for stockholders that has not yet been paid out to them, and some miscellaneous items, together with the amounts paid to buy back
Common Stock Represents what the new owners paid for the new shares
Owners' Equity Accounting Eq. OE = A- L (owners' equity is equal to net asset or net worth)
Income Statement Results of a flow of transactions (the income-generating transactions) over a period of time
Income Statement shows Revenues earned and expenses incurred by the company during a period of operations (+/- in owner's equity and net assets)
Revenue Company's sales of products or services, and they result in increases in owners' equity (+ in owners' equity and an + in cash or accounts receivable )
Revenue Rule The flow of revenues depends on the seller's completion of the sales agreement and does not de end on the flow of cash.
Cost Company ordered merchandise from suppliers and the company paid ( or agreed to pay) an amount
Gross Margin The difference of cost of the merchandise sold that is matched against its sales price
Cost of Goods Sold Sale (increase in equity) and the cost of the sale ( decrease in equity) are always recorded at the same time
Operating Expense Day to Day Business and generate revenues
Accrual Accounting Operating Expense Obligation to pay them, regardless of when the cash payment is required
R&D, Marketing, etching Expenses at the time it used those goods or service
Depreciation "Unallocated Cost" Periodic reduction in that cost served to reduce owners' equity
Affiliates Costs for restructuring such as closing a product line, factory, or subsidiary and interestt paid or Earned
Income Taxes Expense, some of the taxes a company is liable for are incurred and paid in the same period and are recorded as an expense at that time; liable for during a period are not payable until a tax return is prepared to the end of the report period
Trends Comparison of results from year to year may indicate
Dividends Distribution of a portion of the company's income to stockholders
Retained earnings Income that is not paid out as dividends in earnings of the business retained for use in the business
Retained earnings Increased by the amount of net income to companies shareholders and decreased by the dividends declared or promised to those shareholders
Changes in owners' equity Details of all other changes in owners' equity accounts resulting from transactions between the company and its owners.
Earnings Per Share (EPS) Analysts do to evaluate stock prices is to compare a company's BPS with the current price per share
Net income Final after-tax measure of a company's performance and reflects the difference between all revenues and all costs and expenses
Income before taxes Measures management's success in pricing products and controlling costs.
Income Statement Formal eq. (Revenue + Expenses)
Owner's Equity Formal eq. [Equity Transactions + (Revenue + Expenses)]
Created by: desmond.larkin