Century 21 Accounting Chapter 1

periodicity assumption – an assumption that the economic life of a business can be divided into artificial time periods
Anything owed by a business is a/an: – Liabilities
Budgeting includes only the financial aspects of the plan and not any nonfinancial aspects such as the number of physical units manufactured. – False
Perpetual – inventory and cost of goods sold updated with each purchase and sale
Drawer – The person or firm issuing a check.
Expense – A decrease in assets,other than withdraws by the owner, which result from efforts to produce revenue.
Revenue – an increase in owner's equity resulting from the operation of a business
A government enters into a capital lease for the purchase of a new snow plow. The present value of the future lease payments is $845,500 and there is a down payment at the inception of the lease of $25,000. The snow plow should be recorded in the government-wide statement of net position at:
expense recognition principle – The recognition of expenses is related to net changes in assets and earning revenues.
Assets – what a company OWNS
most liquid –> least liquid
cash, accounts receivable, notes receivable, supplies, prepaid insurance, equipment, long term investments
ROA profit driver analysis – decrease in ROA from previous year means firm earned X less for each $ of investment (vis versa)
proving cash – determining that the amount of cash agrees with the accounting records
Accrual accounting – reports on effects of events that ultimately have cash effects
Focuses on economically meaningful event (revenue recognition)
Matches outflows with the inflows they help to generate (expense recognition)
posting – The process of transferring data from the journal into the general ledger.
Financial Statements – Financial reports that summarize the financial conditions and operations of a business
A gоvernment enters intо а cаpitаl lease fоr the purchase of a new snow plow. The present value of the future lease payments is $845,500 and there is a down payment at the inception of the lease of $25,000. The snow plow should be recorded in the government-wide statement of net position at:
What is "Trade off"? – A trade-off is an exchange of part of one characteristic for part of another.
Merchandise companies – Can make/sell their own product. Or sell product from another
Proving cash – determining that the amount of cash agrees with the accounting records

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