ACC101 Practice Flashcards

A comprehensive set of vocabulary flashcards covering basic accounting principles, bond financing, inventory valuation, and the accounting cycle.

Accounts Receivable

Amounts owed to a company by a customer for products and services provided on credit.

Bond Premium

Occurs when a company issues bonds with a contract rate higher than the market rate, resulting in the bond selling for more than its par value.

Retained Earnings

A company's cumulative net income less any net losses and dividends declared since its inception.

Accounting Equation

The relationship between a company's assets, liabilities, and equity, expressed as $\text{Assets} = \text{Liabilities} + \text{Equity}$.

Registrar

An entity in a corporation that maintains a list of stockholders and handles dividend payments.

Known Liabilities

Obligations that are measurable and certain, such as accounts payable or notes payable.

Sales Discounts (Perpetual System)

Discounts that reduce inventory cost when payment is made within a specific discount period.

Perpetual Inventory System

An inventory system that continually updates accounting records for merchandise transactions.

No-Par Value Stock

Stock that does not have a stated value assigned to it in the corporate charter.

Contract Rate

The bond interest rate, also known as the coupon rate or stated rate, used to determine the annual interest paid.

Periodic Inventory System

An inventory system that updates accounting records for merchandise transactions only at the end of a period.

Stock Dividend

A corporation's distribution of additional shares of its own stock to its stockholders without the receipt of any payment.

Conservatism Principle

The accounting principle primarily supported by the lower of cost or market (LCM) rule.

Outstanding Stock

Shares of stock that have been issued by the corporation and are currently in the hands of investors.

Paid-In Capital

The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock.

Discount on Bonds Payable

A contra liability account that occurs when a company issues bonds with a contract rate less than the market rate.

Accounts Payable

Amounts owed to suppliers for products and/or services purchased on credit.

Unearned Revenue

A liability created when a customer pays in advance for products or services before the revenue is earned.

Double-Declining-Balance Method

A depreciation method calculated as $2 \times (1 / \text{useful life}) \times \text{Beginning Book Value}$.

Preemptive Right

The right of common shareholders to purchase their proportional share of any common stock later issued by the corporation.

FOB Shipping Point

A shipping term where the buyer is responsible for the cost of shipping.

FOB Destination

A shipping term where the seller is responsible for the costs of shipping goods to the buyer.

Book Value

The value of an asset as it appears on a balance sheet, equal to its cost minus accumulated depreciation.

Matching Principle

The accounting principle that requires expenses incurred to generate revenue to be recorded in the same period as that revenue.

Going-Concern Assumption

The assumption that a business will continue operating instead of being closed or sold.

Business Entity Assumption

The assumption that a business is accounted for separately from other business entities, including its owner.

T-Account

A simple account form used as a tool to understand how debits and credits affect an account balance, where the left side is debit and the right side is credit.

Temporary Accounts

Accounts closed at the end of each accounting period, including revenues, expenses, withdrawals, and the Income Summary account.

Permanent Accounts

Accounts that are not closed at the end of a period, consisting of assets, liabilities, and owner capital.

Acid-Test Ratio

A measure of a company's ability to pay its current liabilities, calculated using quick assets like cash and receivables.

Gross Profit

Calculated as Net Sales minus Cost of Goods Sold.

LIFO (Last-In, First-Out)

An inventory valuation method where the items acquired last are treated as the ones sold first.

FIFO (First-In, First-Out)

An inventory valuation method where the cost of the oldest items in inventory are assigned to cost of goods sold first.

Financing Activities

Activities that involve obtaining cash from lenders and owners, such as obtaining a long-term loan or contribution from an owner.

Investing Activities

Activities that involve the purchase and sale of long-term assets like land, buildings, and equipment.

Operating Activities

Activities that involves using resources to research, develop, produce, distribute, and market products and services.

Salvage Value

An estimate of an asset's value at the end of its useful life.

Straight-Line Depreciation

A method that allocates an equal amount of depreciation to each year of an asset's useful life: $(\text{Cost} - \text{Salvage Value}) / \text{Useful Life}$.