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