Accounting I: Financial Accounting Ch 2

historical cost concept – requires that most assets be reported at the amount paid for them regardless of increases in market value
grocer – one who sells household requirements like sugar, coffee, etc.
Common Cash inflows – 1. Increase in revenues and additional contribution margin.
2. Reduction in operating costs
3. Proceeds from selling assets that are no longer used.
True – T or F: The relationship among assets, liabilities, and owner's equity can be written as an equation
File Maintenance – The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current
Objectivity – impartiality including freedom from conflict interest
Costs of poor quality production include the:
a. opportunity cost of the plant and workers
b. effect on current customers
c. effect on potential customers
d. All of these answers are correct. – d. All of these answers are correct.
Trial Balance. – A work paper proving the equality of the debit and credit balances in the ledger.
Drawings – Value of goods or cash that the owner took out of the business for personal use
An analysis of several studies found that strategic planning was appropriate only for large firms and companies with more than 500 employees, where the improvement in financial performance was also quite large.
Expense Matching Principle – requires that expenses be recorded when incurred in earning revenue. Matching costs with benefits
Accounts Receivable/debtors turnover – Measures how long on average it takes for the company to collect outstanding debt
Administrative Expenses (Expense) – Expenses that are incurred in order to organise and run the business. These include all expenses that relate to the business premises.
E.g. rent, office salaries, telephone rental, general expenses, office wages, insurance, repairs, electricity, rates, postage and stationary and accounting fees, depreciation on building
Balance sheet – reports the assets, liabilities, and stockholders' equity of a business at a SPECIFIC date
subsidiary – дочерняя компания
current liabilities – Debts or obligations the company expects to pay off or satisfy within the next year
-accounts payable
-notes payable ( due within a year)
-unearned interest
-interest payable
-salaries payable
—payable within a year
An аnаlysis оf severаl studies fоund that strategic planning was apprоpriate only for large firms and companies with more than 500 employees, where the improvement in financial performance was also quite large.
Sale on account – sale for which cash will be received in a later date
Assets – Resources a business owns or controls that are expected to provide current and future benefits to the business. (p.22)

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