Operating Cycle in Accounting Flashcards

Operating Cycle in Accounting Flashcards
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Estimated Taxes
Taxes that businesses must pay four times yearly. They are intended to be an estimate of the total amount of money that the business will owe in taxes for the entire year.
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Income Taxes
Federal and state governments requires businesses to pay this kind of tax on any money that they earn. Sometimes city governments require these payments as well.
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Sales Taxes
A tax levied by state governments on items that we purchase. Because the money is owed to the state government, this tax is considered a liability.
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Advantages of Capitalizing Expenses
This process can increase how profitable a business looks. It may also save companies money on taxes, as this allows you to write off the depreciation of items.
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Expensing Expenses
In this process, you count items as expenses when you purchase them and they cut into your profits. This means your profits may look smaller than they otherwise would.
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Capitalizing Expenses
Businesses do this when they count items they use as assets instead of expenses. You can only do this with items that last a long time.
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Employee Benefits
These are things like bonuses or sick days that are paid out to employees. Businesses must account for these when they are earned by employees.
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Accounting Liability Contingency
These are contingencies that will lower a company's bottom line. Once a company knows they are likely to occur, the company should report them.
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Accounting Gain Contingency
A specific kind of contingency that will raise a company's bottom line. If a company wins a lawsuit, it may represent this kind of contingency.
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Accounting Contingency
Accountants use this term to refer to an event that will probably occur. This event will somehow impact the profits of a company. For example, needing to clean up waste could be one of these.
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20 cards in set

Flashcard Content Overview

Check out this set of flashcards when you're ready to go over both gain and liability accounting contingencies. You'll find cards that deal with the processes of expensing and capitalizing expenses. These cards also address income, estimated and sales taxes. You can also use these cards to review the line items found on an income statement, including net sales, cost of sales, gross income, net income and interest expenses.

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Accounting Contingency
Accountants use this term to refer to an event that will probably occur. This event will somehow impact the profits of a company. For example, needing to clean up waste could be one of these.
Accounting Gain Contingency
A specific kind of contingency that will raise a company's bottom line. If a company wins a lawsuit, it may represent this kind of contingency.
Accounting Liability Contingency
These are contingencies that will lower a company's bottom line. Once a company knows they are likely to occur, the company should report them.
Employee Benefits
These are things like bonuses or sick days that are paid out to employees. Businesses must account for these when they are earned by employees.
Capitalizing Expenses
Businesses do this when they count items they use as assets instead of expenses. You can only do this with items that last a long time.
Expensing Expenses
In this process, you count items as expenses when you purchase them and they cut into your profits. This means your profits may look smaller than they otherwise would.
Advantages of Capitalizing Expenses
This process can increase how profitable a business looks. It may also save companies money on taxes, as this allows you to write off the depreciation of items.
Sales Taxes
A tax levied by state governments on items that we purchase. Because the money is owed to the state government, this tax is considered a liability.
Income Taxes
Federal and state governments requires businesses to pay this kind of tax on any money that they earn. Sometimes city governments require these payments as well.
Estimated Taxes
Taxes that businesses must pay four times yearly. They are intended to be an estimate of the total amount of money that the business will owe in taxes for the entire year.
Net Income / Net Profit
This is the amount you earn after taxes and other extraordinary expenses are taken out. This number appears on an income statement's final revenue line. We sometimes call it the bottom line.
Net Income: Formula
Income pre-tax - tax payments - extraordinary expenses
Pre-Tax Income
This is a company's operating income after interest expenses are taken out.
Operating Income
Businesses find this amount by taking their gross margins and subtracting their operational expenses.
Operational Expenses
Expenses that must be paid to ensure a company continues to run.
Gross Income / Gross Margin / Gross Profit
The amount of money a company has left after subtracting the cost of sales from its net sales.
Net Sales
This refers to all the money brought into a company by sales.
Cost of Sales
These costs represent what a company has to pay in order to produce the products it sells.
Interest Expenses
These expenses are the cost of a company's debts.
Income Statement
A financial statement that companies use to list all of their income and expenses during a given amount of time.

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