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Chapter 4 vocab
| Term | Definition |
|---|---|
| accounting cycle | begins with analyzing and journalizing transactions and ends with the post-closing trial balance |
| accrual basis of accounting | revenues are reported on the income statement in the period in which a service has been performed or product has been delivered |
| cash basis of accounting | revenues and expenses are reported on the income statement in the period in which is cash received/paid |
| closing entries | journal entries that transfer the balances of temporary accounts to the permanent accounts at the end of the accounting period |
| closing process | process of transferring the balances of temporary accounts to permanent accounts accounting period |
| current assets | cash and other assets that are expected to be converted to cash or sold or used up usually within one year or less |
| current liabilities | liabilities that will be due within a short time |
| current ratio | a financial ratio that expresses the current relationship between ad current assets and liabilities =DIVIDE(current assets/ current liabilities) |
| fixed assets | physical resources that are owned and used by a business that have a long life |
| liquidity | ability to convert assets into cash |
| long-term liabilities | liabilities that will not be due for a long time |
| notes receivable | a customer's written promise to pay an amount and possibly an interest rate |
| permanent accounts | term for balance sheets accounts because they are relatively permanent |
| property, plant, and equipment | long term or relatively permanent tangible assets such as equipment |
| solvency | ability of a firm to pay its debts as they come due |
| temporary accounts | income statements accounts because their balances only relate to one period and are not carried forward |
| working capital | the excess of current assets of a business over its current liabilities |
| real accounts | balance sheet accounts because they are relatively permanent |
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hellocookies
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