ACCT 2 Chapter 4
Vertical analysis
Vertical analysis—reporting an amount on a financial statement as a percentage of another item on the same financial statement.
Financial ratio
a comparison between two components of financial information.
Income statement
a financial statement showing the revenue and expenses for a fiscal period
Statement of cash flows
a financial statement that summarizes cash receipts and cash payments resulting from business activities during a fiscal period.
Schedule of accounts receivable
a listing of customer accounts, account balances, and total amount due from all customers.
Schedule of accounts payable
a listing of vendor accounts, account balances, and the total amount due all vendors.
Trial balance.
a proof of the equality of debits and credits in a general ledger.
Departmental margin statement
a statement that reports departmental margin for a specific department.
Adjusted trial balance
a trial balance prepared after adjusting entries are posted.
Post-closing trial balance
a trial balance prepared after the closing entries are posted.
Unadjusted trial balance
a trial balance prepared before adjusting entries are posted.
Cash flow
the cash receipts and cash payments of a company.
Operating activities
the cash receipts and payments necessary to operate a business on a day-to-day basis.
Gross profit
the operating revenue remaining after cost of merchandise sold has been deducted.
Depreciation expense
the portion of a plant asset's cost that is transferred to an expense account in each fiscal period during that asset's useful life.
Accounting cycle
the series of accounting activities included in recording financial information for a fiscal period.
Marginal tax rate
the tax rate associated with a tax bracket.
Capital stock
total shares of ownership in a corporation.
Departmental margin
Departmental margin—the revenue earned by a department less its cost of merchandise sold and less its direct expenses.
Fiscal period
Fiscal period—the length of time for which a business summarizes its financial information and reports its financial performance.
Balance sheet
Balance sheet—a financial statement that reports assets, liabilities, and owners' equity on a specific date.
Statement of stockholders' equity
Statement of stockholders' equity—a financial statement that shows changes in a corporation's ownership for a fiscal period.
Retained earnings
an amount earned by a corporation and not yet distributed to stockholders.
Indirect expense
an operating expense changeable to overall business operations and not identifiable with a specific department.
Direct expense.
an operating expense identifiable with and chargeable to the operation of a specific department.
Investing activities
cash receipts and cash payments involving the sale or purchase of assets used to earn revenue over a period of time.
Financing activities
cash receipts and payments involving debt or equity transactions.
Fiscal year
consisting of 12 consecutive months.
Tax bracket
each tax rate and taxable income amount on one line of a tax table.
Dividends
earnings distributed to stockholders.
Responsibility accounting
financial statement reporting revenue, costs, and direct expenses under a specific department's control.
Responsibility statements
financial statement reporting revenue, costs, and direct expenses under a specific department's control.
Adjusting entries
journal entries recorded to update general ledger accounts at the end of a fiscal period.
Closing entries
journal entries used to prepare temporary accounts for a new fiscal period.
Plant assets
physical assets that will be used for a number of years in the operation of a business
