What is Cash Accounting? Cash Accounting is the system of accounting for receipts and payments in cash or through bank accounts – effectively a part of a normal accounting system.
What are credit policies? – Definition A firm could adopt a very conservative credit policy and extend credit only to customers with excellent credit ratings. Although this type of policy virtually eliminates bad debts or uncollectible accounts, the firm can lose sales and profits by not extending credit to individuals or firms with less-than-perfect credit …
What is meant by the common dollar statement? The financial statement in which the appropriate total figure is set to 100%, and in which other items are expressed as a percentage of that figure.
What is the current method? A method of foreign currency translation under which all balance sheet items can be translated at a current exchange rate at the date of the financial statements; income statement items are translated at the average exchange rate for the period.
What are Current Cost Statements? Those financial statements that are adjusted for specific price changes are called current cost statements.
What is meant by Current Cost/Constant Purchasing Power Dollar Statements? Those financial statements that are adjusted for both specific and general price level changes are called current cost of constant purchasing power dollar statements.
What is meant by Constant Dollar Statements? Those financial statements that are adjusted for general price level changes are called constant dollar statements.
What are consolidated financial statements? Consolidated financial statements are the combined financial statements, less certain eliminations, of a parent company and its subsidiaries.
What is meant by the complex capital structure? A capital structure in which there are certain types of bonds, preferred stock or other securities that are convertible into common shares is called a complex capital structure.
What is meant by the common stock equivalent? Common stock equivalent is dilutive security that, because of the terms or circumstances at the time of its issue, is essentially equivalent to common stock, allowing the holder to become a common stockholder at some future date.
What is meant by the change in accounting method? A change that occurs when a firm switches from one generally accepted accounting principle or method to another generally accepted principle or method.
What do you mean by Capitalized Retained Earnings? Retained Earnings transferred to permanent capital, unavailable for future cash dividends is called capitalized retained earnings. Usually occurs when a stock dividend is issued.
What is Convertible Preferred Stock? Preferred stock that enables preferred stockholders to convert their preferred stock, at a stated rate and time, to common stock.
What is meant by Contributed Capital? The legal capital plus any additional capital contributed by the stockholders or others is called contributed capital.
What is meant by the term “Call Premium”? Call Premium is the difference between the call price and par value of a callable preferred stock.
How to define “Coupon Bonds”? Coupon bonds are those bonds that are not registered in the name of individual holders, but that are negotiable by whoever holds them.
How to define Current maturities of Long-term Debt? It is those portion of long-term liabilities that are payable within one year of the balance sheet date, and as a result are classified as current.
What is meant by Compound Interest? Compound interest is the interest computed on the principal plus any previously accrued interest.
What is meant by the term “Compensated Absences”? A liability that arises as employees working accrue certain fringe benefits that allow them time off with full or partial pay, including such benefits as vacation and sick pay.
What is meant by Copyrights? Copyrights are the exclusive rights of the creator or his/her heirs to reproduce and/or sell an artistic or published work.
What is the capital lease? A capital lease is a long-term lease that is, in effect, an installment purchase of assets.
Define the term “Cash” Cash is a medium of exchange that a bank will accept for deposits, including coins, paper money, money order, checks, certified and cashier’s checks, and money on deposit in a bank.
What is Controlling Account? Controlling account is the main or primary account that is maintained in the general ledger.
What is meant by the accounting term “current maturity”? Current maturity of long-term debt is the portion of long-term liabilities that is payable within 12 months from the balance sheet date.
Current Liabilities – Definition Current liabilities are those liabilities that will either be paid or require the use of current assets within a year (or within the operating cycle, if longer), or that result in the creation of new current liabilities. Current vs Long-term Liabilities In preparing a balance sheet, liabilities are classified as either …
What is meant by the term “current assets”? Current assets are the cash or other assets reasonably expected to be realized in cash or sold within the normal operating cycle of a business or within one year (if the operating cycle is longer than one year).
What are consolidated statements? Consolidated statements are the combined financial statements of a parent company and its subsidiaries.
What is meant by the term “Consistency”? Consistency is an accounting convention requiring that a firm uses the same accounting procedures and policies from one period to the next.
What is meant by the accounting term “Conservatism”? Conservatism is the prudence exercised in financial reporting as a result of the uncertainties surrounding business and economic activities. when faced with accounting alternatives accountants tend to choose those that are least likely to overstate assets or income. Conservatism Principle For historical reasons, an accountant is always …
What is meant by the term “Comparability”? Comparability is the qualitative characteristic of accounting information that presents information in such a way that the users can identify similarities and differences between two sets of economic events. It can be used to evaluate the financial position and performance of one firm over time or to compare …
What is a Classified Financial Statement? A Financial Statement that is subdivided into categories to allow for meaningful interfirm and interperiod comparison is called classified financial statement.
What is the Contra Account? Contra Account is an account, the balance of which is subtracted from the associated account on the financial statements.
What are the closing entries? Closing entries are the journal entries made at the end of the period, used to update retained earnings to reflect the results of operations and to eliminate the balances in the revenue and expense accounts, so that they may be used again in a subsequent period. When closing entries are …
How to define term “Comparative Balance Sheet”? The comparative balance sheet may be defined as a balance sheet in which data for two or more periods is shown in the adjacent columnar form.
What is meant by Cash Basis? Cash Basis is the accounting system in which revenues and expenses are not recognized until the cash is received or paid.
How to define the term credit? The term credit may be defined as an entry on the right side of the ledger account representing a decrease in an asset account and an increase in an equity account.
What is meant by the chart of accounts? Chat of accounts is a listing of all of the accounts used by a particular firm. Each account is assigned a unique number.
What is a Corporation? A corporation is a business entity legally viewed as separate and distinct from its owners; the “stockholders.”
What is a Conceptual Framework Project? A theoretical framework for accounting used to develop objectives and concepts that the Financial Accounting Standards Board (FASB) used to decide upon the standards of external financial reporting.
Who is a Certified Public Accountant (CPA)? A CPA is a professional accountant licensed by individual states to practice accounting after having met a number of requirements.
What is Capital Stock? Capital stock may be defined as a component of stockholders’ equity that represents the amount invested by the owners of the business. A general term for common stock.
Definition If a buyer returns goods to the seller bought on credit, the buyer’s account will be credited by the seller and will be informed by the seller through a note. This note is called “Credit Note“.
Definition The document that a seller issued to a buyer while selling goods on cash is called a cash memo.
Definition It is the remuneration for the services rendered by one person to another. Example Amount paid to a commission agent.
Definition The persons or company from whom the goods or services are purchased on credit and to whom the amount is payable are called creditors. Creditors are also termed as Accounts Payable. Example John Sold goods to Harry on credit for $500, John is a Creditor of Harry.
What is Cash Discount? Definition It is a rebate or allowance from the amount due granted by the creditor to the debtor at the time when the debtor makes payment before the due date. Cash discount is offered to encourage the early payment. If payment is due within a specified period of time after the …
Definition When goods are sold and cash is not received immediately but postponed to a future date then this is termed as credit sales. Explanation A major portion of wholesale and retail sales in the United States is on credit. As a result, some firms have a substantial portion of their current assets in the …
Definition When goods are sold & cash is received at the same time then this type of sales are called cash sales. Example If Mr. B has sold goods on January 1, 2019 and he received cash at the same time then this will be termed as cash sales.
Definition If goods are purchased but payment is postponed to a future date then this is called credit purchases. Example: If Mr. A purchases goods worth $3,000 on January 1, 2019 and promises to pay this amount one month later i.e. February 2019 then this will be termed as credit purchases.
Definition When goods are purchased for immediate cash payment these are called cash purchases. Example If Mr. A purchased goods worth $2,000 on January 1, 2019 and payment is made by him on the same day then this will be termed as cash purchases.