Accounting Chapter 4

Some argue that the use of FIFO in a period of inflation enables a company to avoid reporting paper (phantom) profit as economic gain.
A. True
B. False – FALSE
A new average cost is computed each time a purchase is made in the
A. average cost method.
B. moving-average cost method.
C. weighted-average cost method.
D. all of these methods. – B
Pricing – Charging for goods and services to make a profit
PURCHASE ALLOWANCES – AN AMOUNT GRANTED TO THE PURCHASER AS AN INCENTIVE TO KEEP GOODS THAT ARE NOT "AS ORDERED"
The accounting Equation – Assets=Liabilities+Equity
To what does the phrase on account refer? – Buying items or services and paying for them at a future date
Objectivity Principle – The objectivity principal states that transactions will be recorded on the basis of objective evidence. It means that different people looking at the evidence will arrive at the same values for the transaction (Similar to Reliability Characteristic.)
Increases assets through sale of product. – Revenue
W-2 form – wage and tax statement; a report furnished by the employer for each employee indicating gross earnings and deductions for income and FICA taxes
Lion’s Share Inc. just bought a $2.5 million machine that will be depreciated over its 15 year life using straight line depreciation. The marginal tax rate is 35%.What is Lion’s Share after tax salvage value if the machine is sold in year 7 for $1.75 million?
international accounting standards board (IASB) – An organization that issues International Financial Reporting Standards (IFRS) for many countries outside the United States.
How to calculate GST payable or receivable? – GST balance = GST collected – GST Paid.
Positive = GST payable
Negative = GST receivable
accounting cycle – external transactions- record& post external transactions.
adjusting entries- record& post adjusting entries.
reporting process- prepare financial statements.
closing process- record & post closing entries.
Purchases Discount – A cash discount on purchases taken by a customer.
income statement
Statement of Earnings or
Statement of Operations) – 1st financial statement prepared
R-E=net income
EXPRIED COSTS reduce owners equity
the profitability of the firm over a period of time
Accrual
What is a creditor? – A Supplier who is owed a debt by the business for goods or services purchased from them on credit
Sensitivity analysis is a "what-if" technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes. – True
Liоn’s Shаre Inc. just bоught а $2.5 milliоn mаchine that will be depreciated over its 15 year life using straight line depreciation. The marginal tax rate is 35%.What is Lion’s Share after tax salvage value if the machine is sold in year 7 for $1.75 million?
Memo Information – – Used only when no other transaction is suitable (Not Cash Inflow, Cash Outflow, Credit Purchase, Credit Sale
– Only withdraw stock (Non Cash Items such as Capital, Contribution of non-cash items, advertising (stock used for advertising)
Budget. – A formal written statement, which may be based upon adjusted historical data, of management's plans for the future expressed in financial terms.
Stockholders equity – Акционерный капитал
debit balance – normal balance of asset, expense and drawing account
Social security – F.I.C.A refers to

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