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33 Cards in this Set
- Front
- Back
Promissory Note
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A written promise to pay a specified amount of money at a particular future date.
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Maturity Date
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The date when final payment of the note is due; also called the due date.
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Interest Rate
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The Percentage rate of interest specified by the note for one year.
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Payee of the Note
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The entity to whom the maker promises future payment.
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Note Term
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The period of time during which the interest is earned.
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Principal
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The Amount loaned out by the payee and borrowed by the maker of the note.
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Maturity Value
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The sum of the principal plus interest due at maturity.
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Maker of the Note
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The entity that signs the note and promises to pay the requires amount.
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Interest
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The revenue to the payee for loaning the money; the expense to the debtor.
Equation:Principal*Int. Rate* Time |
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Current Asset
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An asset that will become cash, be sold, or be used up within twelve months.
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Multi-Step Income Statement
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The I/S format which shows important subtotals.
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Gross Profit Percentage
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Gross Profit / Net Sales Revenue
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Ending Retained Earnings
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Beg. Retained Earnings + Net Income - Dividends
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Current Ratio
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Current Assets / Current Liabilities
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Classified Balance Sheet
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Separated Current & Long-Term Assets and Liabilities
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Amortization
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The paying off of debt in regular installments over a period of time.
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Vertical Analysis
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shows you the relationships among components of one financial statement, measured as percentages. On your balance sheet, each asset is shown as a percentage of total assets; each liability or equity item is shown as a percentage of total liabilities and equity. On your statement of profit and loss, each line item is shown as a percentage of net sales.
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Horizontal Analysis
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provides you with a way to compare your numbers from one period to the next, using financial statements from at least two distinct periods.
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Consistency Principal
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The idea in accounting that once an accounting method is adopted, it should be followed consistently from one accounting period to the next.
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Materiality Concept
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he principle that trivial matters are to be disregarded in accounting, and all important matters are to be disclosed. Items that are large enough to matter are material items.
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Matching Principle
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A fundamental concept of accrual basis accounting that offsets revenue against expenses on the basis of their cause-and-effect relationship. It states that, in measuring net income for an accounting period, the costs incurred in that period should be matched against the revenue generated in the same period.
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Lower-of-cost-or-market rule
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states that if the market value of ending inventory is lower than the book value of such inventory, the resultant loss must be recognized in the current period.
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Market Value
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is the amount that would have been paid to replace the merchandise.
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Perpetual Inventory System
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means that the Inventory account is adjusted perpetually. The Inventory account is affected each time inventory is sold or purchased.
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Periodic Inventory System
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only adjusts the Inventory account at the end of an accounting period. Purchases and sales do not affect the Inventory account during the accounting period, but do affect at the period end.
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Inventory Turnover
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Cost of Goods Sold / Average Inventory
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Horizontal Analysis (Growth Rate (GR))
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(Current Year - Prior Year) / Prior Year
Measures change in $ numbers for one year to another. Used to compare same line item to itself between periods. |
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Vertical Analysis (Common-size Income Stmt.)
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Income Statement line item / Net Revenues
Used to convert any/all $ data on the income statement to percentages to facilitate comparisons. Used to compare each line item to Net Sales for a single time period |
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Vertical Analysis (Common-size Balance Sheet):
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Balance Sheet line item / Total Assets
Used to convert any/all $ data on the balance sheet to percentages to facilitate comparisons. Used to compare each line item to Net Sales for a single time period |
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Working Capital
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Current Assets - Cur. Liab
Excess of C/A over C/L at a point in time. |
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Quick Ratio (QR) (WAY calls this the “acid-test” ratio):
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Cash + Net A/R + mrkt. securities* / Current Liabilities
Measures short-term liquidity more rigorously than the current ratio by eliminating inventory, usually the least liquid current asset. |
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Average Days in Receivables:
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365 days / A/R turnover ratio (WAY) or Average A/R / Average daily sales (RC)
Indicates days required to convert receivables into cash. |
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Average days in Inventory:
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365 days / inventory turnover ratio (WAY) or Average Inventory / Average Daily COGS (RC)
Indicates days required to sell inventory |