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Mechanics of the Accounting Cycle Flashcards

Mechanics of the Accounting Cycle Flashcards
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Trial Balance
This lists every account a business has, along with the balances of each account. Accountants use this mainly as a way to ensure mathematical calculations are accurate.
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Return on Equity Ratio: Formula
Net income / average stockholder equity = return on equity.
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Return on Equity Ratio
A ratio used to assess the return a business gets on every dollar stockholders invest.
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Debt-to-Assets Ratio: Formula
Total liabilities / total assets = debt-to-assets ratio.
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Debt-to-Assets Ratio
You can look at this ratio to see how many of your assets were paid for by debt.
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Earnings Per Share (EPS) Ratio: Formula
Net income / weighted average of shares of outstanding common stock.
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Earnings Per Share (EPS) Ratio
A ratio that can tell a business what amount of net income it earns for each share of its common stock.
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Working Capital Ratio / Current Ratio: Formula
Current assets / current liabilities.
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Working Capital Ratio / Current Ratio
This ratio is used to measure a company's current liabilities against its current assets.
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Quick Ratio: Formula

(Cash + cash equivalents + accounts receivable) / current liabilities.

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Quick Ratio
Businesses use this ratio to compare the dollars they have in cash and accounts receivable with the dollars they owe in liabilities.
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Return on Assets: Formula
Percent return on assets = net income / total assets x 100
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Return on Assets (ROA)
You can use this financial statement ratio to assess how well your company is generating revenue with the use of its assets.
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26 cards in set

Flashcard Content Overview

This set of flashcards allows you to focus on asset accounts, accounts receivable accounts, inventory accounts and accounts payable accounts. You'll find cards that cover the debt-to-assets ratio, the current ratio, the quick ratio and the earnings per share ratio. Ledgers and the chart of accounts will also be covered by this set.

Front
Back
Return on Assets (ROA)
You can use this financial statement ratio to assess how well your company is generating revenue with the use of its assets.
Return on Assets: Formula
Percent return on assets = net income / total assets x 100
Quick Ratio
Businesses use this ratio to compare the dollars they have in cash and accounts receivable with the dollars they owe in liabilities.
Quick Ratio: Formula

(Cash + cash equivalents + accounts receivable) / current liabilities.

Working Capital Ratio / Current Ratio
This ratio is used to measure a company's current liabilities against its current assets.
Working Capital Ratio / Current Ratio: Formula
Current assets / current liabilities.
Earnings Per Share (EPS) Ratio
A ratio that can tell a business what amount of net income it earns for each share of its common stock.
Earnings Per Share (EPS) Ratio: Formula
Net income / weighted average of shares of outstanding common stock.
Debt-to-Assets Ratio
You can look at this ratio to see how many of your assets were paid for by debt.
Debt-to-Assets Ratio: Formula
Total liabilities / total assets = debt-to-assets ratio.
Return on Equity Ratio
A ratio used to assess the return a business gets on every dollar stockholders invest.
Return on Equity Ratio: Formula
Net income / average stockholder equity = return on equity.
Trial Balance
This lists every account a business has, along with the balances of each account. Accountants use this mainly as a way to ensure mathematical calculations are accurate.
Chart of Accounts
A list of all a company's accounts. Businesses set this up very soon after they open.
General Ledger
A financial ledger that holds information about all of a company's accounts.
Subsidiary Ledger
This type of ledger only holds information about a specific account found in the general ledger.
Inventory Account
This account is an asset. If you make a purchase to buy goods to run your business, the money you spent is debited from this account.
Accounts Payable Account
A kind of liability account that is credited when a business makes a purchase on credit.
Cash Account
Money is credited to this account when a business makes a purchase with cash. It's debited when a customer pays you cash.
Source Documents
We use this term when referring to papers that can prove a transaction took place. Examples can include copies of business invoices, deposit slips and paychecks.
Accounts Receivable Account
An account used to record deposits made on goods in a business. If a customer reserves an item and then pays for it, the amount they paid will be credited to this account.
Debit
We use this term to refer to entries made to a T-account's left side. These increase the balances for assets and prepaid expenses while lowering balances for liabilities and equity balances.
How to determine if finances are balanced
Add up your assets and expenses. If they equal one another then your finances are balanced.
Current Assets
Assets of this kind will be either used or sold in a single year. An example would be cash.
Noncurrent Liabilities
These are liabilities that will last for more than a single year. Often payments on large items, like machinery, will be liabilities of this kind.
Asset Accounts
These are accounts that record current and noncurrent assets. The balance of this account will increase if you purchase things for your business.

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