Business Accounting And Financial Information

Business Accounting And Financial Information

This discussion is about business accounting and financial information.

A characteristic of a fixed asset is that it is

used in the operations of a business

Land acquired so it can be resold in the future is listed in the balance sheet as an


Insurance costs during construction

are included in the constructing of a building

Brokerage commissions

are included in the cost of the land

Accumulated depreciation

is a contra asset account

Expenditures that add to the utility of fixed assets for more than one accounting period are

capital expenses

All leases are classified as either

capital leases or operating leases

A fixed asset’s estimated value at the time it is to be retired from service is called

residual value

All of the following: cost, estimated life, residual value are needed for the calculation of straight line depreciation but not

units produced

The method of determing depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is

declining balance

The most widely used depreciation method is

straight line

The depreciation method that does not use residual value in calculating the first year’s depreciation expense is

double declining balance

Residual value is also known as scrap, tradein, salvage but not

net book value

Expected useful life is

estimated at the time the asset is placed in service

The accumulated depletion account is

reported on the balance sheet as a deduction from the cost of the mineral deposit

The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called


Expenditures for research and development are generally recorded as

current operating expenses

The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is


The exclusive right to use a certain name or symbol is called a


Fixed assets are ordinarily presented in the balance sheet

in a separate section along with intangible assets

Current liabilities are

due and payable in one year

On June 8, 120 day note would be what due date:

October 6

A current liability is a debt that can be reasonably expected to be paid

within one year

Unearned rent

would most likely be classified as a current liability

The current portion of long-term debt should

be reclassified as a current liability


planning, recording, analyzing, and interpreting financial information

accounting system

a planned process for providing financial information that will be useful to management

accounting records

organized summaries of a business’s financial activities

financial statements

financial reports that summarize the financial condition and operations of a business

service business

a business that performs an activity for a fee


a business owned by one person


anything of value that is owned


financial rights to the assets of a business


an amount owed by a business

owners equity

the amount remaining after the value of all liabilities is subtracted from the value of all assets

accounting equation

an equation showing the relationship among assets, liabilities, and owner’s equity


the principles of right and wrong that guide an individual in making decisions

business ethics

the use of ethics in making business decisions


a business activity that changes assets, liabilities, or owner’s equity


a record summarizing all the information pertaining to a single item in the accounting equation

account title

the name given to an account

account balance

the amount in an account


the account used to summarize the owner’s equity in a business


an increase in owner’s equity resulting from the operation of a business

sale on account

a sale for which cash will be received at a later date


a decrease in owner’s equity resulting from the operation of a business


assets taken out of a business for the owner’s personal use