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ACC EXAM 4 (DEF)
| Question | Answer |
|---|---|
| receivables: | all money claims against other entities, including people, companies, and other organization |
| accounts receivable: | normally collected within a short period (30-60 days); current asset |
| Notes receivable: | amounts that customers owe for which a formal, written instrument of credit has been issued (60+ day period, current asset) |
| Other Receivables: | include interest, taxes receivable, and receivables from officers or employees (reported separately, within 1 year: current assets, beyond 1 year: investments) |
| direct write-off method: | records bad debt expense only when an account is determined to be worthless (small companies) |
| allowance method: | records bad debt expense by estimating uncollectible accounts at the end of the accounting period (GAAP) |
| Accounts receivable turnover ratio: | sales / avg accounts receivable |
| Days sales in receivables: | avg accounts receivable / avg daily sales |
| interest on a note: | Interest = Face Amount x Interest Rate x (Term/360 days) |
| Fixed assets: | long-term or relatively permanent assets such as equipment, machinery, buildings, and land |
| Capital Expenditure: | fixed asset or investment |
| Revenue Expenditure: | expense |
| Physical depreciation: | factors include wear and tear during use or from exposure to weather |
| Functional depreciation: | factors include obsolescence and changes in customer needs that cause the asset to no longer provide services for which it was intended |
| depreciable cost: | is the difference between a fixed asset’s initial cost and its residual value |
| straight-line method: | provides for the same amount of depreciation expense for each year of the asset’s useful life |
| units-of-activity method: | provides the same amount of depreciation expense for each unit of activity of the asset |
| double-declining-balance method: | provides for a declining periodic expense over the expected useful life of the asset |
| Fixed asset turnover ratio: | Sales / Avg book value of fixed asset |
| Long-term liabilities: | debts due beyond one year |
| Current liabilities: | debts that will be paid out of current assets and are due within one year |
| Accounts payable: | involve a variety of purchases on account, including the purchase of merchandise and supplies |
| Accrued liabilities: | reflect an obligation to pay current assets in the future |
| installment note: | debt that requires the borrower to make equal periodic payments to the lender for the term of the note |
| FICA tax: | Social Security and Medicare |
| Federal Unemployment Compensation Tax (FUTA): | This employer tax provides for temporary payments to those who become unemployment |
| State Unemployment Compensation Tax (SUTA): | This employer tax also provides temporary payments to those who become unemployed |
| Fringe benefits: | may include vacation, medical, and retirement benefits (recorded as an expense) |
| defined contribution plan (Pension Plan): | the company invests contributions on behalf of the employee during the employee’s working years |
| defined benefit plan: | the company pays the employee a fixed annual pension based on a formula |
| Periodic Payments (interest portion): | computed by multiplying the interest rate by the carrying amount (book value) of the note at the beginning of the period |
| Periodic Payments (principal portion): | computed as the difference between the total installment note payment (cash paid) and the interest component |
| contingent liabilities: | may arise from past transactions only if certain events occur in the future |
| Quick ratio: | quick assets / current liabilities |
Created by:
IanMcCormick20