Accounting Chapter 4 Vocabulary

TIME PERIOD ASSUMPTION – Assumption that an organization's activities can be divided into specific time periods such as months, quarters, or years
Work Sheet – A columnar accounting form used
Accounting Equation – Assets= liablities+equity
bad debt expense – operating expense, IS, debit
income statement – accounts are TEMPORARY accounts, closed at year end. Next year's balance begins at zero.
Dividends are also closed at year end.
financial ratios – show how the elements of financial statements relate to each other
What side of the journal entry is cash recorded when a company pays a cash dividend? – Credit
Industry Practices – Peculiarities of some industries and business concerns that cause variations from basic accounting theory or practice.

For example, agricultural companies often report crops at fair value because it is costly to develop accurate cost figures on individual crops. Pg.63

Basophilia occurs when the absolute count is greater than which of the following?
Sales Return – A firm's acceptance of a return of goods from a customer.
Northern Funeral Home started a business by investing $50,000 in cash. The appropriate entry would be: – Debit Cash/Credit Owner's Equity (Capital)
An accounting entry that involves more than two accounts: – Compound journal
Bаsоphiliа оccurs when the аbsоlute count is greater than which of the following?
CLOSING ENTRIES – ENTRIES THAT TRANSFER THE REVENUE, EXPENSE AND DIVIDEND BALANCES TO THE RETAINED EARNINGS ACCOUNT
GAAP – Stands for: Generally Accepted Accounting Principles

It is a series of conventions, rules and procedures that companies have to follow.

IAS 18 Revenue – * "the inflow of economic benefit arising from the ordinary activities of a business"
* Recognition of revenue based on realisation concept – recorded in accounts when legal title passes between buyer and seller NOT when payment is made
* Recorded at the fair value of monies received or receivable
* SALE OF GOODS & SERVICES – RECOGNISED WHEN seller has transferred to buyer the risks/rewards of ownership, seller retains no control over G&S's, amount of revenue from G&S's can be measured reliably, probable economic benefits will flow to seller of G&S's, costs incurred can be measured reliably
* INTEREST, ROYALTIES AND DIVIDENDS – INTEREST: using a time basis to calculate interest, ROYALTIES: on an accrual basis in accordance with royalty agreement, DIVIDENDS: when shareholder's right to receive payment is established
Art of organization, maintaining, recording and analyzing financial activities – Accounting

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