Century 21 Accounting Chapter 3

owners equity – the amount remaining after the value of all liabilities is subtracted from the
value of all assets
ECONOMIC ENTITY ASSUMPTION – The use of consolidated statements is justified.
Indirect Labor – labor costs that cannot be physically traced to particular produces or that can be traced only at great cost and inconvenience.
computing operating revenue – 1. Gross revenue is entered as a credit
2. then Sales Returns and allowances are subtracted from Gross Revenue which yields
3. Net Sales
appraisal costs – cost incurred to determine whether products and
services are conforming to requirements
assets – probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events
What is “structure 2”?
Contra Account. – An account designed to accumulate totals to offset a related account.
Sarbanes-Oxley Act – An act that created a board to oversee the public accounting profession
NUMBER OF DAYS IN INVENTORY – RATIO THAT MEASURES THE AVERAGE NUMBER OF DAYS THAT INVENTORY IS HELD BY A COMPANY

3 OF DAYS IN YEAR / INVENTORY TURNOVER

checking account – A bank account from which payments can be ordered by a depositor.
Balance Sheet – Reports:
1. What the company has and uses to operate the business; called assets
2. What the company owes; called liabilities
3. The amount of the company owned by the owners; called stockholders' equity.
All amounts reported are CUMULATIVE of a specific date.
Whаt is “structure 2”?
Gains – Increases in assets or decreases in liabilities from peripheral transactions.

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