Accounting Unit 2

expenses – assets used up or services consumed in the process of generating revenue
current assets – one of the common groups on the classified balance sheet

expected to be used or collected in cash within one year or less

advertising expense – operating expense, IS, debit
**ON EXAM** #9
Which of the following correctly identifies normal balances of accounts – D. Assets Debit
Liabilities Credit
Stockholders' Equity Credit
Revenues Credit
Expenses Debit
Dividends – Distributions to equity holders
furnitures and fixtures – noncurrent asset
Temporary Accounts – Revenues, Expenses, Dividends
International Financial Reporting Standards
(IFRS) – The standards being developed and promoted by the International Accounting Standards
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"Total Asset Turnover" Classify, Calculate, and Interpret – Activity Ratio

Total Asset Turnover = [ Revenue / Average Total Assets ]

The effectiveness of the firm's use of its total assets to create revenue. Should be close to industry norm. High turnover: too few assets for potential sales; Low turnover: too much capital tired up in its asset base

OIF investment income received – operating effect
Accounting – Palnning, recording, analyzing, and interpreting financial information for a fiscal period
Inventory Turnover – The number of times inventory is purchased and sold during the accounting period (inventory turnover = cost of goods sold + average inventory).
Indirect Method – For preparing the operating activities section of the statement of cash flows, the approach in which the net income is reconciled to net cash flow from operations.
Bank over draft – Advantage:
– provide a saftey net for firms with irregular payments
– most banks are happy for the account to remain over drawn ad longd as it does not exceed the overdraft limit
– readily accessible

-high interest charge
-can be recalled at short notice

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retained earnings statement – A summary of the changes in the retained earnings in a corporation for a specific period of time, such as a month or a year.
Asset – °Past transaction
°Present control
°Future economic benefit

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