Accounting Vocabulary Chps 1 3

Statement of cash flows – A summary of the cash receipts and cash payments for a specific period of time
First-in, first-out inventory costing method – Using the price of merchandise purchased first to calculate the cost of merchandise sold first
Recording transactions into a journal – Journalizing
convertible – shares can be exchanged for common stock
purchased inventory – an asset
check – a business paper from which information is obtained for a journal entry.
Bond Indenture – Stated/Contract/Coupon Rate
1.) Principle and interest payment dates (i.e., annual, semi-annual, etc.)
2.) Maturity date (i.e., 30 years)
3.) Bond Covenants (minimum capital or other ratio requirements)
4.) Callable/Convertible Features
5.) Does not indicate Market/Current/Effective Rates
Generally accepted accounting principles
(GAAP) – The rules of financial accounting.
plant assests – tangible assests used in a companys operations that have useful life of more than one accounting period (plant and euipment, property, plant, and equipment)
activity drivers – factors that measure the consumption of activities
by products and other cost objects.
Identify structure #2.
provisión por gratificaciones – provision for bonuses
Declining-Balance Depreciation and formula – Is the method that allocates the cost of an asset over its useful life based on a multiple of the straight-line rate (often two times).

Depreciation Expense = ((Cost – Accumulated Depreciation) x ( 2 / Useful Life))

When the owner contributes personal truck to the biz, assets _ – Increase
net income – revenues > expenses
Depreciation/Depletion/Amortization Methods – 1.) Straight-line—easiest to apply [Annual Depreciation Expense = (Asset Cost-Residual Value) / Estimated Useful Life] 2.) Units-of-Production—primarily used to Deplete natural resources
3.) Declining-Balance—apply factor to Net Book Value (NBV) of asset each period [Residual Value is not considered in calculation]
Identify structure #2.
revenue – increase in owners equities do to business operations.
In a perpetual inventory system, which of the following would be debited when goods are purchased with the intent of being resold?
A. Cost of Goods Sold.
B. Inventory.
C. Purchases.
D. Accounts Payable. – B
Promissory Note. – A written promise made by a person or business to pay a certain sum of money to another person or business at a specified time in the future.
reasons for inventory to fall below its recorded cost – 1. it is easily replaced by identical items at a lower cost
2. it becomes outdates or damaged

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