Financial Statements Flashcards

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Questions and Answers

What do current assets refer to?

Liabilities of the enterprise

Assets held for more than one year

Assets that are not expected to be realized

Assets expected to be realized within the normal operating cycle (correct)

What is the operating cycle?

The interval of time from acquisition of merchandise inventory to ultimate collection of cash from sales.

What does cash represent in accounting?

Money, either paper or coins and substitutes like checks and money orders.

What is cash on hand?

Cash within the premises of the business. Signup and view all the answers

What does cash in bank refer to?

Cash deposited in the bank. Signup and view all the answers

What are cash equivalents?

Short-term, highly liquid investments readily convertible to known amounts of cash. Signup and view all the answers

What is a petty cash fund?

An account for money set aside for petty or small expenses. Signup and view all the answers

What does notes receivable refer to?

A promissory note received by the business from a customer. Signup and view all the answers

What is accounts receivable?

Amounts collectible from services rendered or sale of goods on credit. Signup and view all the answers

What is estimated uncollectible accounts?

An account that provides for losses from uncollectible accounts. Signup and view all the answers

What does estimated realizable value represent?

The difference between accounts receivable and estimated uncollectible accounts. Signup and view all the answers

What are advances to employees?

Amounts collectible from employees for cash advances against salaries or wages. Signup and view all the answers

What are inventories?

Assets held for sale, in production, or supplies consumed in production. Signup and view all the answers

What is supplies inventory?

Cost of stationery or supplies purchased for use but not yet consumed. Signup and view all the answers

What are prepaid expenses?

Expenses paid in advance but not yet incurred. Signup and view all the answers

What is accrued income?

Income that is already earned but not yet collected. Signup and view all the answers

What are property and equipment?

Tangible assets held for use in production or services. Signup and view all the answers

What is land in accounting terms?

The site where buildings are constructed for business use. Signup and view all the answers

What is investment property?

Land reserved for future use. Signup and view all the answers

What is a building in financial terms?

A finished construction owned by the business for operations. Signup and view all the answers

What is equipment?

Calculators, typewriters, adding machines, and computers. Signup and view all the answers

What are furniture and fixtures?

Chairs, tables, counters, and display cases. Signup and view all the answers

What is accumulated depreciation?

A contra-asset account as a deduction from property and equipment. Signup and view all the answers

What are depreciable assets?

Assets subject to depreciation. Signup and view all the answers

What are capital expenditures?

Incidental costs incurred in acquiring property and equipment. Signup and view all the answers

What is carrying value or net book value?

The difference between property and equipment and its accumulated depreciation. Signup and view all the answers

What are current liabilities?

Financial obligations expected to be settled within one year. Signup and view all the answers

What is accounts payable?

A financial obligation constituting a promise to pay. Signup and view all the answers

What is notes payable?

Obligation evidenced by a promissory note. Signup and view all the answers

What are accrued expenses?

Expenses incurred but not yet paid. Signup and view all the answers

What is unearned income?

Income collected in advance but services not yet rendered. Signup and view all the answers

What is mortgage payable?

A financial obligation requiring collateral property for payment. Signup and view all the answers

What is service income?

All types of income derived from rendering services. Signup and view all the answers

What is professional income?

Income earned from the practice of a profession. Signup and view all the answers

What is rental income?

Income earned on rented buildings or properties. Signup and view all the answers

What is interest income?

Income from borrowed money generally covered by a promissory note. Signup and view all the answers

What is miscellaneous income?

Income that cannot be clearly classified. Signup and view all the answers

What does profit signify in accounting?

Excess of revenues over expenses. Signup and view all the answers

What does loss signify in accounting?

Excess of expenses over revenues. Signup and view all the answers

What is supplies expense?

Cost of supplies that were used. Signup and view all the answers

What is rent expense?

Amount paid or incurred for property use. Signup and view all the answers

What are repairs and maintenance?

Expenses for repairing or servicing owned assets. Signup and view all the answers

What is salaries expense?

Compensation given to employees. Signup and view all the answers

What are uncollectible accounts?

Anticipated losses from uncollectible accounts. Signup and view all the answers

What is depreciation expense?

Portion of cost of property and equipment that has expired. Signup and view all the answers

What are taxes and licenses?

Amount paid for business permits and licenses. Signup and view all the answers

What is insurance expense?

Expired portion of insurance premium paid. Signup and view all the answers

What are utilities expenses?

Costs associated with telephone, light, and water bills. Signup and view all the answers

What is interest expense?

Expense incurred from borrowed money. Signup and view all the answers

What is miscellaneous expense?

Any amount paid as an insignificant expense. Signup and view all the answers

What are gas and oil expenses?

Account for fuel used by company vehicles. Signup and view all the answers

Study Notes

Current Assets and Operating Cycle

Current Assets consist of resources expected to be sold, consumed, or realized within the operating cycle.
The Operating Cycle is the time frame from acquiring inventory to collecting cash from the sale of that inventory.

Cash and Cash Equivalents

Cash encompasses money in various forms: coins, paper currency, checks, and other cash equivalents.
Cash on Hand refers to physical cash maintained within the business premises.
Cash in Bank signifies cash that is deposited and held in financial institutions.
Cash Equivalents are short-term, highly liquid investments easily convertible to cash.

Receivables

Notes Receivable represent promissory notes received from customers for services rendered or goods sold.
Accounts Receivable refers to amounts clients owe for services rendered on credit or goods sold on account.
Estimated Uncollectible Accounts serve as a contra-asset account for expected losses from receivables that may not be collected.

Inventory Types

Inventories include items held for sale, in production, or materials and supplies for production or service provision.
Supplies Inventory or Unused Supplies account for stationery or other materials purchased but not yet used.

Prepayments and Accrued Income

Prepaid Expenses are costs paid in advance for services or goods not yet consumed.
Accrued Income includes revenue already earned but not yet received in cash.

Property, Equipment, and Depreciation

Property and Equipment are tangible assets used in operations or for rental and are expected to last beyond one accounting period.
Land is the physical site of the business building.
Investment Property refers to land held for future use.
Buildings account for finished constructions utilized by the business for operations.
Equipment includes various tools used in operations, while Furniture and Fixtures cover office furnishings.
Accumulated Depreciation is a contra-asset account that reduces the value of Property and Equipment due to depreciation.

Liabilities

Current Liabilities are obligations expected to be settled within the operating cycle or one year from the balance sheet date.
Accounts Payable encompasses financial obligations that involve a promise to pay for goods or services received.
Notes Payable refers to obligations secured by promissory notes.
Accrued Expenses are costs incurred but not yet paid.
Unearned Income involves revenue collected in advance for services not yet provided.

Income Types

Service Income constitutes all revenue from providing services.
Professional Income is specifically for earnings derived from a professional practice.
Rental Income is revenue from leasing out properties managed by the business.
Interest Income arises from lending money and collecting interest payments.
Miscellaneous Income covers earnings not tied to the primary business activities.

Profit and Loss

Profit is defined as the excess of revenues over expenses.
Loss is the opposite, where expenses exceed revenues.

Operating Expenses

Supplies Expense is the cost incurred for materials used.
Rent Expense covers the cost of using property.
Repairs and Maintenance include expenses for servicing business property and assets.
Salaries Expense tracks compensation given to employees.
Uncollectible Accounts reflect anticipated losses on receivables.

Depreciation and Other Expenses

Depreciation Expense indicates the systematic allocation of an asset's cost over its useful life.
Taxes and Licenses account for business permit and licensing costs, excluding non-deductible income tax.
Insurance Expense represents the cost of insurance premiums that have expired.
Utilities Expense includes expenses for essential services like electricity, water, and telecommunications.
Interest Expense refers to the cost associated with borrowed funds.
Miscellaneous Expense captures various minor costs that don’t fit into specific categories.

Gas and Oil

Gas and Oil account for expenses related to fuel and lubricants used by company vehicles.

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Description

Test your understanding of key terms related to financial statements with this set of flashcards. Learn about current assets, operating cycles, and cash definitions to enhance your financial literacy. Mastering these concepts is essential for anyone studying accounting or finance.