Horngren’s Accounting Chapter 2 Vocabulary

revenue – an inflow of assets resulting from the sale of goods and services
Liabilities – These are debts and obligations of a company.
replenishing the fund – add all expenses and credit cash
Corporation – Legally separate from its owners
How does a company calculate vat due at the end of the month? – Output vat minus input vat
$294.00 – John Smith is employed at a local funeral home and is paid on an hourly rate of $5.00 per hour. He is also paid time and a half for any hours worked in excess of 40 hours per week. For the current pay period, he worked a total of 60 hours. If his FICA tax is 6%, and his withholding tax is 10%, what is his take-home pay for the week
Liquidity – how soon an asset is expected to convert into cash or a liability is expected to be paid. what the BALANCE sheet is based on.
Favourable or unfavourable revenues & expenses? – Revenues
– Favourable if actual is more/higher than budgeted.
– Unfavourable if actual is less/lower than budgeted.
Expenses
– Favourable if actual is less/lower than budgeted.
– Unfavourable if actual is more/higher than budgeted.
All of the following statements describe appropriate assessments of children EXCEPT:
Simple Rate of Return Formula – (Annual Net Cash Flows – Annual Depreciation**) / Initial Investment = Simple Rate of Return %

** Cost – Residual Value / Useful Life

double – entry accounting – our accounting style
income summary – temporary account, NA, NA
Accounting equation – The equation showing the relationship among assets liabilities and owners equity
net income – amount by which revenues exceed expenses
Materiality – closely relates to relevance and deals with the relative size of an error in accounting information.
magnitude of an accounting information omission or misstatement that will affect the judgement of someone relying on the information.
Accounts Receivable – When the customer is expected to pay the company in a period AFTER goods or services are provided. Customers OWE the company. Cash is normally expected to be received in 30-90 Days. ie. Utilities
All оf the fоllоwing stаtements describe аppropriаte assessments of children EXCEPT:
Gross profit rate – Gross profit expressed as a percentage, by dividing the amount of gross profit by net sales.
opening an account – writing title and number on the heading of an account

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