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

investment


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

depletion


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

amortization


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

trademark


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


accounting

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


proprietorship

a business owned by one person


asset

anything of value that is owned


equities

financial rights to the assets of a business


liability

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


ethics

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


business ethics

the use of ethics in making business decisions


transaction

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


account

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


capital

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


revenue

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


expense

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


withdrawals

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


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