Term
| When making closing entries, which accounts do you close? Which accounts are not closed? What are the other names for these accounts? |
|
Definition
1. temporary or nominal accounts. revenue accounts
cost of goods sold accounts
administrative expenses accounts
selling expenses accounts
other income statements accounts
2. real or permanent accounts:
cash
accounts receivable
allowance for doubtful accounts
inventory
prepaid insurance
accounts payable
accrual liabilities (expenses)
owner's equity
other balance sheet accounts |
|
|
Term
| Why do we have the closing procedure? |
|
Definition
The first reason is so that revenues, expenses and dividends will start with a zero balance at the beginning of the new year.
The second reason is so that the company’s retained earnings account will include an increase for revenues from prior year and a decrease for expenses and dividends from prior year. |
|
|
Term
| What is the current ratio? |
|
Definition
| company's ability to pay for short-term obligations. it is current assets over current liablities |
|
|
Term
| What is the accounting cycle? Do you know the various steps within the accounting cycle? |
|
Definition
1. refers to the steps in preparing financial statements.
2. 1 analyze transactions - 2 journalize - 3 post - 4 prepare unadjusted trial balance - 5 adjust - 6 prepare adjusted trial balance - 7 prepare statements - 8 close - 9 prepare post-closing trial balance - 10 reverse (optional) |
|
|
Term
| Why do we have a properly designed internal control system? |
|
Definition
| to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. |
|
|
Term
| What do we include as “Cash” on a balance sheet? |
|
Definition
| amounts on deposits, savings accounts, cash-equivalents, received things. |
|
|
Term
| Why do we prepare a bank reconciliation on a timely basis? |
|
Definition
| the balance of a checking account reported on the bank statement rarely equals the balance in the depositors accounting records. This is usually due to information that one party has that the other does not. There must be proof of both the depositors records and the banks. |
|
|
Term
| What are cash equivalents? |
|
Definition
| short-term, highly liquid investment assets meeting two criteria: 1. readily convertible to a known cash amount. 2. sufficiently close to their due date so that their market value is not sensitive to interest rate changes. |
|
|
Term
| What will one find on their bank statement? (4) |
|
Definition
1. beginning-of-period balance of the depositors account
2. checks nd other debits decreasing the account during the period
3. deposits and other credits increasing the account during the period.
4. end-of-period balance of the depositors account. |
|
|
Term
| When we are using the allowance method for doubtful accounts, and we write off a uncollectible account, what is the net effect on the current assets? |
|
Definition
| it shows a reasonable estimate for the bad debts expense |
|
|
Term
|
Definition
| matches the estimated loss from uncollectible accounts receivabl against the sales they helped produce |
|
|
Term
|
Definition
| recors the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is made to predict bad debts expense |
|
|
Term
| What is the matching principle? How does it relate to accounts receivable? |
|
Definition
| requires expenses to be reportd in the same accounting period as the sales they helped produce. This means that if extending credit to customers helped produce sales, the bad debts expence linked to those sales is matched and reported in the same period. |
|
|
