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Accounting ch 15

College Accounting ch 15

QuestionAnswer
Accounts Receivable Turnover The number of times the accounts receivable turned over, or were collected, during the accounting period. When 365 is divided by the turnover, this measure can be expressed in terms of average number of days required to collect receivables.
Average Collection Period The number of days in the year (365) divided by the accounts receivable turnover. Provides an indication of the number of days credit customers take to pay for their purchases.
Average Days to Sell Inventory The number of days in the year (365) divided by the inventory turnover. Provides an indication of the average number of days required to sell inventory.
Book Value Cost of plant and equipment less the accumulated depreciation amounts. Also called undepreciated cost.
Current Assets Cash and all other assets expected to be converted into cash or consumed within one year or the normal operating cycle of the business, whichever is longer.
Current Liabilities Those obligations that are due within one year or the normal operating cycle of the business, whichever is longer, and will require the use of current assets.
Current Ratio Current assets divided by current liabilities.
General Expenses Those expenses associated with administrative, office, or general operating activities.
Gross Margin Net sales minus cost of goods sold. Also known as gross profit.
Gross Profit Net sales minus cost of goods sold. Also known as gross margin.
Income From Operations Gross profit minus operating expenses on a multiple-step income statement.
Interstatement Analysis Compares the relationship between certain amounts in the income statement and balance sheet.
Inventory Turnover The number of times the merchandise inventory turned over, or was sold, during the accounting period. When 365 is divided by the turnover this measure can be expressed in terms of the average number of days required to sell inventory.
Liquidity Refers to the speed with which an asset can be converted to cash.
Long-Term Liabilities Those obligations that will extend beyond one year or the normal operating cycle, whichever is longer.
Mortgage A written agreement specifying that if the borrower does not repay a debt, the lender has the right to take over specific property to satisfy the debt.
Mortgage Payable An account that is used to reflect an obligation that is secured by a mortgage on certain property.
Multiple-Step Income Statement This statement shows a step-by-step calculations of net sales, cost of goods sold, gross profit, operating expenses, income from operations, other revenues and expenses, and net income.
Net Sales Gross sales less returns and allowances and less sales discounts.
Operating Cycle The length of time generally required for a business to buy inventory, sell it, and collect the cash.
Operating Income Gross profit minus operating expenses on a multiple-step income statement.
Post-Closing Trial Balance A trial balance taken after the temporary owners' equity accounts have been closed.
Property, Plant, and Equipment Assets that are expected to be used for more than one year in the operation of the business.
Quick Assets Cash and all other current assets that can be converted into cash quickly, such as accounts receivable and temporary investments.
Quick Ratio Quick assets divided by current liabilities.
Return on Owner's Equity Net income divided by average owner's equity.
Reversing Entry The opposite of the adjusting entry. It is made on the first day of the next accounting period and simplifies recording transactions in the new period.
Selling Expenses Those expenses directly associated with selling activities.
Single-Step Income Statement This statement lists all revenue items and their total first, followed by all expense items and their total.
Undepreciated Cost Cost of plant and equipment less the accumulated depreciation amounts. Also called the book value.
Working Capital The difference between current assets and current liabilities, which represents the amount of capital the business has available for current operations.
Created by: dengler