Century 21 Accounting Chapter 1

cost-benefit principle – methods and procedures allowing managers to control and monitor business activities
Double taxation – When corporations are taxed on income tax, and when investors are taxed on income in dividends
Explain the Application of the Basic Principles of Accounting (2) – (2) Revenue recognition principle: A company generally recognizes revenue when (a) realized or realizable and (b) earned.
Assets, Liabilities Equity and Net Income cannot – all be affected at the same time
General Purpose of Cash Budgets – 1) Cash Budgets which show all expected "estimated cash receipts" and "estimate less cash payment." It then calculates the firms expected "estimated cash surplus (deficit)" for the budget period and it's expected "estimate bank balance at end" of the budget period
purchases journal – A special journal used to record only purchases of merchandise on account.
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Account Title – name given to an account
book value/undepreciated cost – the cost of a fixed asset less its accumulated depreciation
Purchase Invoice. – A source document prepared by the seller listiing the items shipped, their cost and the method of shipment (from the buyer's viewpoint).
supplies – a type of asset that will be consumed as it used (examples supplies and office supplies)
component percentage – the percentage relationship between one financial statement item
and the total that includes that item
Costs that are difficult to change over the short run are always variable over the long run. – True
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Client Fees – An increase to which of the accounts will increase owner's equity?
annual report – Document distributed to share holders and other interested parties that contains financial statements , notes to the financial statements
"Return On Total Capital (ROTC)" Classify, Calculate, and Interpret – Operating Profitability Ratio

= [ EBIT / Average Total Capital ]

Too low raises concern. You can also include PV of operating leases (Fixed assets as a long-term liability)

Retail Sales Tax – Imposed upon the purchaser of goods and collected by the seller, who remits such to the state or city government
Financial Statement Order – income statement, Retained Earnings, Balance Sheet

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