Accounting Chapter 5

Accounts and short-term notes receivable are reported in the current assets section of the balance sheet at
A. cash (net) realizable value.
B. net book value.
C. lower-of-cost-or-market value.
D. invoice cost. – A
Neutrality is an ingredient of this primary quality of accounting information. – Faithful representation.
inventory – current asset, BS, debit
Working capital – Current assets-current liability
Financial Accounting – Generates reports and communicates them to external decision makers so they can evaluate how well the business has achieved their goals.
Electronic Funds Transfer (EFT) – An electronic transfer of money from one account to another.
Periodic expense – costs that are billed by time period, regardless of the level of revenue. rent, salaries, insurance premiums, interest expense
[ 15 ] Depreciation is incorporated explicitly in the discounted cash flow analysis of an investment proposal because it   A. Is a cost of operations that cannot be avoided. B. Is a cash inflow.   C. Reduces the cash outlay for income taxes. D. Represents the initial cash outflow spread over the life of the investment.
3. Revenues represent
1. the cash collected from customers during the year of the income statement
2. the cash collected from sales made during the year of the income statement
3. the sum of the selling prices of all the goods sold to the customers during the year of the income statement
4. the sum of the costs of all the goods sold to the customers during the year of the income statement – 3. the sum of the selling prices of all the goods sold to the customers during the year of the income statement
Retained earnings – Net income-dividends
Accounts Receivable – Represents the money customers Owe to
your business
Separate-Entity Assumption – a businesses activities are accounted separately from those of the owner
Check stub – a form on which information is recorded by the drawer of a check concerning the check drawn; a source document.
Financial accounting standards Board FASB – establishing US generally accepted accounting principles
Cost-benefit – weighing the cost of providing information against the benefits that can derived from using it
[ 15 ] Depreciаtiоn is incоrpоrаted explicitly in the discounted cаsh flow analysis of an investment proposal because it   A. Is a cost of operations that cannot be avoided. B. Is a cash inflow.   C. Reduces the cash outlay for income taxes. D. Represents the initial cash outflow spread over the life of the investment.
OP- Operating Profit – • Want 5-digit number that's ok!
• Net Profit = (Operating Profit) + (Vehicle Adj. aka Flip)
o Net Profit is the operating profit of the branch
• Total Revenue / Breakeven = OP
Prepaid expenses – These are expenses paid in cash and recorded as assets before they are used or consumed and are generally shown in the assets section on the balance sheet.
Chart of accounts – a list of all of a company's accounts and their indentification numbers
IAS 37 Provisions, Contingent Liabilities and Contingent Assets – * PROVISIONS (more than 50% likelihood of occurrence) – a liability of uncertain timing/amount; company has obligation as result of a past event; a reliable financial estimate can be made
* Recognised in FS as a liability & disclosed in notes
* CONTINGENT LIABILITIES (less than 50% likelihood) – a possible obligation from past events whose outcome is based on uncertain future events OR an obligation not recognised because it is not probable/cannot be reliably measured
* Possible – no liability recognised in FS, disclosed in notes
* Remote – no liability recognised in FS & no note disclosure
* CONTINGENT ASSETS – a possible asset arising from past events but can only be confirmed by uncertain future events
* Should NOT ever be recognised as this is not prudent until virtually certain
* Disclosed only where an inflow of economic benefit is probable (not when only possible or remote)
* Probable – no asset recognised in FS, disclosed in notes
* Possible – no asset recognised in FS, no note disclosure
* Remote – no asset recognised in FS, no note disclosure
list the 4 financial statements used by a business organization – cash flow statement
income statement
balance sheet
owners equity

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