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99 Cards in this Set
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average inventory cost flow method
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The method of inventory costing that is based on the assumption that costs should be charged against revenue by using the weighted average unit cost of the items sold.
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consigned inventory
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Merchandise that is shipped by manufacturers to retailers who act as the manufacturer’s selling agent.
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consignee
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The name for the retailer in a consigned inventory arrangement.
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consignor
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The name for the manufacturer in a consigned inventory arrangement.
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first-in, first-out (FIFO) inventory cost flow method
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The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.
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gross profit method
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A method of estimating inventory cost that is based on the relationship of gross profit to sales.
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inventory subsidiary ledger
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A ledger containing individual accounts with a common characteristic.
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inventory turnover
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The relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory.
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last-in, first-out (LIFO) inventory cost flow method
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A method of inventory costing based on the assumption that the most recent merchandise inventory costs should be charged against revenue.
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lower-of-cost-or-market (LCM) method
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A method of valuing inventory that reports the inventory at the lower of its cost or current market value (replacement cost).
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net realizable value
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The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.
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number of days’ sales in inventory
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The relationship between the volume of sales and inventory, computed by dividing the inventory at the end of the year by the average daily cost of goods sold.
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physical inventory
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A detailed listing of merchandise on hand.
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purchase order
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The purchase order authorizes the purchase of the inventory from an approved vendor.
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receiving report
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The form or electronic transmission used by the receiving personnel to indicate that materials have been received and inspected.
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retail inventory method
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A method of estimating inventory cost that is based on the relationship of gross profit to sales.
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specific identification inventory cost flow method
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Inventory method in which the unit sold is identified with a specific purchase.
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bank reconciliation
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The analysis that details the items responsible for the difference between the cash balance reported in the bank statement and the balance of the cash account in the ledger.
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bank statement
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A summary of all transactions mailed to the depositor or made available online by the bank each month.
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cash
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Coins, currency (paper money), checks, money orders, and money on deposit that is available for unrestricted withdrawal from banks and other financial institutions.
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cash equivalents
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Highly liquid investments that are usually reported with cash on the balance sheet.
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cash short and over account
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An account which has recorded errors in cash sales or errors in making change causing the amount of actual cash on hand to differ from the beginning amount of cash plus the cash sales for the day.
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compensating balance
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A requirement by some banks requiring depositors to maintain minimum cash balances in their bank accounts.
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control environment
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The overall attitude of management and employees about the importance of controls.
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electronic funds transfer (EFT)
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A system in which computers rather than paper (money, checks, etc.) are used to effect cash transactions.
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elements of internal control
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The control environment, risk assessment, control activities, information and communication, and monitoring.
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employee fraud
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The intentional act of deceiving an employer for personal gain.
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internal controls
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The policies and procedures used to safeguard assets, ensure accurate business information, and ensure compliance with laws and regulations.
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petty cash fund
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A special cash fund to pay relatively small amounts.
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Sarbanes-Oxley Act of 2002
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An act passed by Congress to restore public confidence and trust in the financial statements of companies.
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special-purpose fund
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A cash fund used for a special business need.
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voucher
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A special form for recording relevant data about a liability and the details of its payment.
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voucher system
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A set of procedures for authorizing and recording liabilities and cash payments.
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account receivable
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A claim against the customer created by selling merchandise or services on credit.
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accounts receivable turnover
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The relationship between net sales and accounts receivable, computed by dividing the net sales by the average net accounts receivable; measures how frequently during the year the accounts receivable are being converted to cash.
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aging the receivables
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The process of analyzing the accounts receivable and classifying them according to various age groupings, with the due date being the base point for determining age.
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Allowance for Doubtful Accounts
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The contra asset account for accounts receivable.
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allowance method
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The method of accounting for uncollectible accounts that provides an expense for uncollectible receivables in advance of their write-off.
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bad debt expense
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The operating expense incurred because of the failure to collect receivables.
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direct write-off method
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The method of accounting for uncollectible accounts that recognizes the expense only when accounts are judged to be worthless.
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dishonored note receivable
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A note that the maker fails to pay on the due date.
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maturity value
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The amount that is due at the maturity or due date of a note.
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net realizable value
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The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.
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notes receivable
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A customer’s written promise to pay an amount and possibly interest at an agreed-upon rate.
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number of days’ sales in receivables
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The relationship between sales and accounts receivable, computed by dividing the net accounts receivable at the end of the year by the average daily sales.
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receivables
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All money claims against other entities, including people, business firms, and other organizations.
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accelerated depreciation method
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A depreciation method that provides for a higher depreciation amount in the first year of the asset’s use, followed by a gradually declining amount of depreciation.
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amortization
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The periodic transfer of the cost of an intangible asset to expense.
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book value
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The cost of a fixed asset minus accumulated depreciation on the asset.
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boot
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The amount a buyer owes a seller when a fixed asset is traded in on a similar asset.
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capital expenditures
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The costs of acquiring fixed assets, adding to a fixed asset, improving a fixed asset, or extending a fixed asset’s useful life.
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capital leases
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Leases that include one or more provisions that result in treating the leased assets as purchased assets in the accounts.
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copyright
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An exclusive right to publish and sell a literary, artistic, or musical composition.
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depletion
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The process of transferring the cost of natural resources to an expense account.
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depreciation
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The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.
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double-declining-balance method
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A method of depreciation that provides periodic depreciation expense based on the declining book value of a fixed asset over its estimated life.
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fixed asset turnover ratio
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The number of dollars of sales that are generated from each dollar of average fixed assets during the year, computed by dividing the net sales by the average net fixed assets.
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fixed assets
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Long term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in the normal business operations and that depreciate over time.
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goodwill
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An intangible asset that is created from such favorable factors as location, product quality, reputation, and managerial skill.
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intangible assets
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Long-term assets that are useful in the operations of a business, are not held for sale, and are without physical qualities.
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operating leases
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Leases that do not meet the criteria for capital leases and thus are accounted for as operating expenses.
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patents
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Exclusive rights to produce and sell goods with one or more unique features.
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residual value
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The estimated value of a fixed asset at the end of its useful life.
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revenue expenditures
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Costs that benefit only the current period or costs incurred for normal maintenance and repairs of fixed assets.
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straight-line method
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A method of depreciation that provides for equal periodic depreciation expense over the estimated life of a fixed asset.
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trade-in allowance
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The amount a seller allows a buyer for a fixed asset that is traded in for a similar asset.
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trademark
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A name, term, or symbol used to identify a business and its products.
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units-of-production method
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A method of depreciation that provides for depreciation expense based on the expected productive capacity of a fixed asset.
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contingent liabilities
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Liabilities that may arise from past transactions if certain events occur in the future.
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defined benefit plan
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A pension plan that promises employees a fixed annual pension benefit at retirement, based on years of service and compensation levels.
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defined contribution plan
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A pension plan that requires a fixed amount of money to be invested for the employee’s behalf during the employee’s working years.
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employee’s earnings record
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A detailed record of each employee’s earnings.
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FICA tax
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Federal Insurance Contributions Act tax used to finance federal programs for old-age and disability benefits (social security) and health insurance for the aged (Medicare).
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fringe benefits
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Benefits provided to employees in addition to wages and salaries.
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gross pay
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The total earnings of an employee for a payroll period.
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net pay
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Gross pay less payroll deductions; the amount the employer is obligated to pay the employee.
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payroll
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The total amount paid to employees for a certain period.
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payroll register
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A multicolumn report used to assemble and summarize payroll data at the end of each payroll period.
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pension
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A cash payment to retired employees.
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quick assets
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Cash and other current assets that can be quickly converted to cash, such as marketable securities and receivables.
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quick ratio
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A financial ratio that measures the ability to pay current liabilities with quick assets (cash, marketable securities, accounts receivable).
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cash dividend
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A cash distribution of earnings by a corporation to its shareholders.
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common stock
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The stock outstanding when a corporation has issued only one class of stock.
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cumulative preferred stock
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Stock that has a right to receive regular dividends that were not declared (paid) in prior years.
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discount
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The interest deducted from the maturity value of a note or the excess of the face amount of bonds over their issue price.
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earnings per common share (EPS)
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Net income per share of common stock outstanding during a period.
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in arrears
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Cumulative preferred stock dividends that have not been paid in prior years are said to be in arrears.
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outstanding stock
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The stock in the hands of stockholders.
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par
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The monetary amount printed on a stock certificate.
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preferred stock
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A class of stock with preferential rights over common stock.
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premium
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The excess of the issue price of a stock over its par value or the excess of the issue price of bonds over their face amount.
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prior period adjustments
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Corrections of material errors related to a prior period or periods, excluded from the determination of net income.
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restrictions
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Amounts of retained earnings that have been limited for use as dividends.
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statement of stockholders’ equity
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A summary of the changes in the stockholders’ equity in a corporation that have occurred during a specific period of time.
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stock
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Shares of ownership of a corporation.
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stock dividend
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A distribution of shares of stock to its stockholders.
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stock split
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A reduction in the par or stated value of a common stock and the issuance of a proportionate number of additional shares.
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stockholders
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The owners of a corporation.
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treasury stock
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Stock that a corporation has once issued and then reacquires.
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