Accounting 101 Exam 3

ledger

a company's set of numbered accounts for its accounting record *holds account info that is needed to prepare financial statements and includes accounts for assets, liabilities, owners equity, revenues and expenses

annuity

a fixed sum of money paid to someone each year, typically for the rest of they life *a form of insurance or investment entitling the inventor to a series of annual sums

inventory turnover ratio

a measure of the number of times inventory is sold/used in a time period (such as a year)

account

a record or statement of financial expenditure or receipts relating to a particular period of purpose

debit

an entry recording an amount owed, listed on the LEFT-hand side of an account

credit

an entry recording the ability of a customer to boating goods or services made with repayment, it records the sum received, listed on the RIGHT-hand side of an account

loss contingency

an event with an uncertain outcome that can have a material effect on the balance sheet of a company

gain/loss on sale of asset

calculated as the net disposal proceeds - assets carrying value *debit all accumulated depreciation *credit the fixed assets

depreciation

decrease in value of a currency relative to others

revenue expenditures

for fixed assets, expected to be productive assets for a long period of time. Costs that are related to specific revenue transactions or operating periods (cost of goods sold or repairs, and maintenance expense)

LIFO liquidation

happens when a company uses the last-in-first-out method of inventory costing, and then liquidates its older inventory

tangible operating assets

includes BOTH fixed assets, (machinery, buildings, land, current assets (inventory)) *opposite is Non-Tangible Assets (patents, trademarks, copyrights)

trial balance

listing of the accounts in the ledger along with each accounts balance in the appropriate debit or credit column *the total of the amounts in the debit column should equal the total of amounts in the credit column

capital expenditures

money spent by a business/organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment

gain/loss contingencies

noted on the company's balance sheet and income statement when they are both probable and reasonably correct

journal

record of financial transactions in order by date, often defined as "the book of original entry"

perpetual inventory system

record the sales/purchases of inventory immediately through the use of computers and software

LIFO conformity rule

rule that requires that the same inventory cost flow be used on the financial statements as is on the income tax return

present value

the value in the present a sum of money in contrast to some future value it will have when it has been invested at compound interest

book value

the value of a security or asset as entered in a company book

periodic inventory system

updates on sales made periodically, no effort is really made to keep things up-to-date, records of either the inventory of the cost of goods sold

future value

value of an asset at a specific date, it measures the nominal future sum of money that give a sum of money is "worth" at specified time in the future assuming a certain interest rate, or more generally, rate of return *the present value x accusation function