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Definition
| Rules of thumb, or general principles, for recording transactions and preparing fiancial statements. |
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Term
| Classified financial statements |
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Definition
| General-purpose external financial statements that are divided into subcategories. |
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Term
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Definition
| The convention of presenting information in a way that enables decision makers to recognize similarites, differences, and trends over different periods in the same company and among different companies. |
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Term
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Definition
| The convention that when faced with two equally acceptable alternatives, the accountant chooses the one least likely to overstate assets and income. |
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Definition
| The convention requiring that once a company has adopted an accounting procedure, it must use it from one perod to the next unless a note to the financial statements informs users of a change in procedure. |
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Term
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Definition
| Assets that stockholders have invested in a corporation. |
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Term
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Definition
| The convention that the benefits gained from providing accounting information should be greater that the costs of providing that information. |
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Definition
| The amount a merchadiser paid for the merchandise it sold during an accounting period or the cost to a manufacturer of making the products it sold during an accounting perod. Also called cost of sales. |
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Definition
| Cash and other assets that a company can reasonably expect to convert to cash, sell, or consume within one year or its normal operating cycle, whichever is longer. |
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Term
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Definition
| Obligations due to be paid or performed within one year of or within the normal operating cycle, whichever is longer. |
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Term
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Definition
| The convention requiring that a compnay's financial statements and the accompanying notes present all information relevant to the users' understadning of the statements. |
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Term
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Definition
| The difference between net sales and costs of goods sold. Aslo called gross profit. |
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Term
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Definition
| Total sales for cash and on credit during an accounting period. |
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Term
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Definition
| Gross margin minus operating expenses. Also called operating income. |
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Term
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Definition
| A category for the expense of federal, state, and local taxes that appears only on the income statements of corporations. Also called provision for income taxes. |
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Term
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Definition
| Long-term assets with no physical substance whose value stems from the rights or privileges they extend to their owners. |
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Term
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Definition
| Assets, usually long term, that are not used in the normal operation of a business and that management does not intend to convert to cash within the next year. |
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Term
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Definition
| Debts that fall due more than one year in the future or beyond the normal operating cycle. |
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Term
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Definition
| A company that makes and sells products. |
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Term
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Definition
| The convention that refers to the relative importance of an item or event in a financial statement and its influence on the decisions of the users of financial statements. |
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Term
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Definition
| A company, either a whole-saler or retailer, that buys and sells products. |
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Term
| Multistep income statement |
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Definition
| An income statement that goes through a series of steps to arrive at net income. |
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Term
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Definition
| What remains of gross margin after operating expenses have been deducted, and other revenues and expenses have been added or deducted. |
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Term
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Definition
| The gross proceeds from sales of merchandise (gross sales) less sales returns and allowances and any discounts allowed. Often called sales. |
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Term
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Definition
| The average time a compnay needs to go from spending cash to receiving cash. |
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Term
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Definition
| Expenses other than cost of goods sold incurred in running a business. |
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Term
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Definition
| A balance sheet category that some companies use to group all assts other than current assets and property, plant, and equipment. |
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Term
| Other revenues and expenses |
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Definition
| The section of a multi-step income statement that includes revenues and expenses not related to business operations. Also called nonoperating revnues and expenses. |
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Term
| Property, plant, and equipment |
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Definition
| Tangible long-term assets used in the continuing operation of a business. Also called operating assets, fixed assets, tangible assets, long-lived assets, or plant assets. |
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Term
| Qualitative characteristics |
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Definition
| Standards for judging accounting information. |
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Term
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Definition
| The qualitative characteristic of information that has a direct effect on a decision. |
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Term
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Definition
| The qualitative characteristic of information that represents what it is supposed to represent and is verifiable and neutral. |
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Term
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Definition
| The account that reflects stock-holders' claims to the assets that are earned from corporate operations and that are reinvested in operations. Also called Earned Capital. |
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Term
| Sales returns and allowances |
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Definition
| Refunds, credits, and discounts given to customers who have received defective goods. |
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Term
| Single-step income statement |
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Definition
| An income statement that arrives at net income in a single step. |
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Term
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Definition
| The qualitative characteristic of information that enables users to percieve its meaning. |
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Term
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Definition
| The qualitative characteristic of information that is relevant and reliable. |
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Term
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Definition
| A measure of liquidity that shows the net current assets on hand to continue business operations; Total Current Assets - Total Current Liabilities. |
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Term
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Definition
| A measure of profitability that shows how efficiently assets are used to produce sales; Net sales ÷ Average Total Assets. |
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Term
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Definition
A measure of liquidity;
Current Assets ÷ Current Liabilities. |
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Term
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Definition
A measure of profitability that shows the propostion of a company's assets that is financed by creditors and the proportion financed by the owner;
Total Liabilities ÷ Owner's Equity. |
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Term
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Definition
A measure of profitability that shows the percentage of each sales dollar that results in net income;
Net Income ÷ Net Sales. |
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Term
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Definition
A measure of profitability that shows how efficiently a company uses its assets to produce income;
Net Income ÷ Average Total Assets. |
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Term
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Definition
A measure of profitability that relates the amount earned by a business to the owner's investment in the business;
Net Income ÷ Average Owner's Equity. |
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