Financial Accounting Cycle II - Adjustments

These flashcards cover key terminology and concepts related to the financial accounting cycle and adjustments, based on the notes provided.

Classified Balance Sheet

A balance sheet that lists assets in order of liquidity and liabilities in the order they must be paid.

Current Ratio (CR)

A financial ratio that measures a business's ability to pay current liabilities with current assets. CR = CA/CL.

Debt Ratio (DR)

A leverage ratio that indicates the portion of a business's assets that are financed by debt. DR = TL/TA.

Income Summary

An account used to close revenues and expenses to determine net income.

Closing Entries

Journal entries made at the end of an accounting period to transfer remaining balances in temporary accounts to permanent accounts.

Post-Closing Trial Balance

A trial balance prepared after closing entries are made, reflecting only permanent accounts.

Asset Liquidity

The ease with which an asset can be converted into cash.

Financial Ratios

Quantitative measures used to assess a company's financial performance and condition.

Long-Term Liabilities

Obligations that are due to be paid in a period longer than one year.

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities.

Net Income (NI)

The amount by which revenues exceed expenses during a given period.

Permanent Accounts

Accounts that carry their balances into the next accounting period, such as assets and liabilities.

Drawings Account

An account that tracks withdrawals made by an owner from their business.