Century 21 Accounting Chapter 1

Purchase Order. – A written order by a buyer for merchandise or other property specified in the purchase requisition.
contra asset acount – has a credit balance instead of the debit balance normally seen in asset accounts
partnership advantages – collaborate with someone, not all responsibility, share pressure
Balance Sheets are Never – Closed
Cash flows from investing activities – Cash flows from transactions that affect investments in the noncurrent assets of the company
Common Types of Long-Term Capital Investments: – 1. Purchasing new equipment to reduce costs.
2. Purchasing new property or equipment for expansion.
3. Replacing equipment currently used.
4. Purchasing another company.
5. Adding a new product line that requires additional long-term assets.
What are three reasons a corporation should issue bonds instead of selling common stock? – Stockholders control remains the same, tax savings, higher common stockholders equity
dividends payout ratio – cash dividends declared on common stock / net income
Any stimulus (or event) that follows a response and increases its frequency is said to have:
Sale on account – Sale for which cash will be recieved at a later date
Monetary Unit Assumption – The assumption that requires items on the financial statements to be measured in terms of monetary unit
cost of good sold – subtracting the ending finished good inventory from the cost of finished goods available for sale
Any stimulus (оr event) thаt fоllоws а response аnd increases its frequency is said to have:
Operating Activities – Activities involving the acquisition and sale of products and services.
beginning work-in-process – consists of work done on partially
completed units that represents prior-period work with the
costs assigned to them being prior-period costs. Uses two approaches
for dealing with the prior-period output and costs found in BWIP:
the weighted average method and the FIFOmethod.
Cumulative Preferred Stock – These owners must receive all dividends in arrears plus the current year's dividend before any dividends go to the common stockholders.
Petty Cash Voucher. – A form used to reflect payments from the petty cash fund.
Direct materials – These items include raw materials that become an integral part of the finished goods.

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