Century 21 Accounting Chapter 3

Going Concern Assumption – Accounting assumption that a company will continue in operation for the foreseeable future.

Only in situations in which liquidation appears imminent is the assumption inapplicable. Pg.57

control activities – activities performed by an organization to
prevent or detect poor quality (because poor quality may exist).
periodic inventory system – An inventory system in which a company does not maintain detailed records of goods on hand and determines the cost of goods sold only at the end of an accounting period.
prepaid expenses – Items such as supplies that will be used in the business in the future.
Financial accounting – information is reported at fixed intervals (monthly, Quarterly, yearly) in general-purpose financial statements
Profit – The income that succeeds exspeses
A decrease in net worth due to excess of costs and expenses over income is – Loss
Profitability Ratio – Measures of the operating success of a company for a given period of time.
The key to computing comparative advantage is:
Accounting – Information system that identifies, records, and communicates the economic events of an organization to interested users
What is affected by an increase in revenue? – More cash, more accounts receivable, or less unearned revenue.
2 THINGS:
1st the revenue
2nd a balance sheet account changes
The key tо cоmputing cоmpаrаtive аdvantage is:
Values – an estimation of the worth of things; a set of ethical beliefs and preferences that determine our sense of right and wrong
Asset, Balance Sheet, Debit, Permanent – Cash
Notes receivable are generally interest-bearing and for longer periods of time than accounts receivable. Notes receivable are also evidenced by a written document. What is this statement referring to? – The difference between accounts receivable and notes receivable
Issues with FASB – subject to political pressure. regulations

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