Principles of Accounting Mid Term Exam Review

Flashcards covering key concepts from the Principles of Accounting Mid Term Exam lecture notes.

Income Statement

A summary of a firm’s revenues and expenses over a specific period.

Accounts Receivable

Amounts owed to the company by customers for sales made on credit.

Retained Earnings

Retained earnings increase with net income and decrease with dividends.

Depreciation

Depreciation allocates the cost of a long-term asset over its useful life.

Cash Flow Statement

A financial report that outlines cash inflows and outflows over a specific period.

Accrual Accounting

An accounting method that recognizes revenues and expenses when they are incurred, regardless of cash flow.

Cost of Goods Sold (COGS)

The direct costs attributable to the production of the goods sold by a company.

Goodwill

An intangible asset that arises when a buyer acquires an existing business, representing the excess paid over the fair value of the net identifiable assets.

LIFO (Last In, First Out)

An inventory valuation method where the last items purchased are the first to be sold.

FIFO (First In, First Out)

An inventory valuation method where the first items purchased are the first to be sold.

Unearned Revenue

Money received by a company for goods or services not yet delivered or performed.

Operating Expenses

The costs required to run a company's day-to-day operations, excluding the costs of goods sold.

Bad Debt Expense

The estimated amount of accounts receivable that are expected to be uncollectible.

Straight-Line Depreciation

A method of depreciation in which the same amount of depreciation expense is allocated for each period.

Double-Declining Balance Depreciation

An accelerated method of depreciation that doubles the straight-line depreciation rate.

Prepaid Expenses

Payments made in advance for goods or services to be received in the future.

Service Revenue

Income earned from providing services to customers.

Market Value

The price at which an asset would trade in a competitive auction setting.

Financial Statement Effects Template (FSET)

A method used to record the effects of transactions on financial statements.