ACC 2010 CH 1 - 4 TEST

The right side of an account

Credit

______ _______ are assets that are expected to be converted to cash or used in the business within a short period of time. Usually ONE YEAR

Current Asset

Accounts payable is a ____________ (current liability, property plant and equipment, current asset, long-term liability, intangible asset)

Current Liability

An accounting period that is one year long.

Fiscal year

The assumption that the company will continue in operation for the foreseeable future.

Going concern assumption

Notes clarify information presented in the financial statements and provide additional detail.

Notes to the financial statements

The average time required to purchase inventory, sell it on account, and then collect cash from customers—that is, go from cash to cash.

Operating cycle

An assumption that the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared for the business.

Periodicity assumption

Balance sheet accounts whose balances are carried forward to the next accounting period.

Permanent accounts

A list of permanent accounts and their balances after a company has journalized and posted closing entries

Post-closing trial balance

The procedure of transferring journal entry amounts to the ledger accounts.

Posting

Expenses paid in cash before they are used or consumed.

Prepaid Expenses

The group charged with determining auditing standards and reviewing the performance of auditing firms.

Public Company Accounting Oversight Board (PCAOB)

A technique that expresses the relationship among selected items of financial statement data.

Ratio Analysis

The amount of net income retained in the corporation.

Retained Earnings

The principle that companies recognize revenue in the accounting period in which the performance obligation is satisfied.

Revenue recognition principle

The quality of information that occurs when independent observers, using the same methods, obtain similar results.

Verifiable

A multiple-column form that companies may use in the adjustment process and in preparing financial statements.

Worksheet

Under Sarbanes-Oxley Act of 2002, top management are required to certify ________ of financial information

accuracy

(increased or decrease) responsibility for board of directors

increased

Profitability measures _____

the income or operating success of an enterprise for a given period of time

Earnings per share measures _____

the net income earned on each share of common stock

Whether an item is large enough to likely influence the decision of an investor or creditor.

Maternity

Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period.

Temporary accounts

Expenses incurred but not yet paid in cash or recorded.

Accrued expenses

Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.

Adjusting entries

(TorF) Current Assets and Long-term investment are found on the classified balance sheet

True

What are examples of current assets?

Cash, Short-term investments, receivables, inventories, and prepaid expenses

An individual who has met certain criteria and is thus allowed to perform audits of corporations.

Certified public accountant (CPA)

An account that is offset against an asset account on the balance sheet.

Contra asset account

The principle that matches expenses with revenues in the period when the company makes efforts to generate those revenues.

Expense recognition principle (matching principle)

(TorF) Accounting data is prepared for two broad groups of users, owners and management

FALSE

(TorF) Investors and creditors are examples of internal users of accounting information

FALSE

A section of the annual report that presents management's views on the company's ability to pay near-term obligations, its ability to fund operations and expansion, and its results of operations.

Management discussion and analysis (MD&A)

Events that require recording in the financial statements because they affect assets, liabilities, or stockholders' equity.

Accounting transactions

An assumption that every economic entity can be separately identified and accounted for.

Economic entity assumption

The group of accounts maintained by a company.

Ledger

Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.

Liquidity ratios

Bonds Payable is a ______

Long-term Liability

_________ Measures of the ability of the company to survive over a long period of time.

Solvency ratios

(T or F) Accounting is the information system that identifies, records, and communicates economic events to interested users

TRUE

(TorF) As a result of the Sarbanes-Oxley Act of 2002, top management must certify the accuracy of financial information

TRUE

Under Sarbanes-Oxley Act of 2002, Increased independence of _________

auditors

A ratio _____

expresses the mathematical relationship between one quantity and another