Accounting Chapter 6

Solvency – Financial ability of a firm to meet its current debts
Average total assets – (Beginning Total Assets + Ending Total Assets) / 2
Operating Activities – Create revenues, expenses, gains and losses (Net income)
*Most important of the 3 categories
liabilities – What the business owes to others (debts)
Materiality assumption – A piece of information is said to be material if it's omission or misstatement could influence the economic decisions of uses made on the basis of the financial statements
Debenture Bonds – Bonds that are not backed by specific collateral.
In order for a test or instrument to be valid it must first be reliable.
Current liabilities – require cash within the current accounting period
accounting – The information system that measures business activities, processes that information into reports and financial statements, and communicates the results to decision makers.
In оrder fоr а test оr instrument to be vаlid it must first be reliаble.
dividends reduce retained earnings but – are NOT expenses
Employer's Annual Federal Unemployment Tax Return, Form 940 – Preprinted government form used by the employer to report unemployment taxes for the calendar year.
income statement – how much the company EARNED during – a specific period of time (monthly, quarterly, yearly)

value of what was provided to the customers (price)

cost of providing to customers
earnings (net income or loss)

Dividend – A distribution of profits of a corporation to its stockholders as declared by the board or director is

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