Session:5 Completing the Accounting Cycle
Key Terms
Principles of Accounting, Volume 1: Financial Accounting | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-financial-accounting
- classified balance sheet
- presents information on your balance sheet in a more informative structure, where asset and liability categories are divided into smaller, more detailed sections
- closing
- returning the account to a zero balance
- closing entry
- prepares a company for the next accounting period by clearing any outstanding balances in certain accounts that should not transfer over to the next period
- current ratio
- current assets divided by current liabilities; used to determine a company’s liquidity (ability to meet short-term obligations)
- income summary
- intermediary between revenues and expenses, and the Retained Earnings account, storing all the closing information for revenues and expenses, resulting in a “summary” of income or loss for the period
- intangible asset
- asset with financial value but no physical presence; examples include copyrights, patents, goodwill, and trademarks
- liquidity
- ability to convert assets into cash in order to meet primarily short-term cash needs or emergencies
- long-term investment
- stocks, bonds, or other types of investments held for more than one operating cycle or one year, whichever is longer
- long-term liability
- debt settled outside one year or one operating cycle, whichever is longer
- operating cycle
- amount of time it takes a company to use its cash to provide a product or service and collect payment from the customer
- permanent (real) account
- account that transfers balances to the next period, and includes balance sheet accounts, such as assets, liabilities, and stockholder’s equity
- post-closing trial balance
- trial balance that is prepared after all the closing entries have been recorded
- property, plant, and equipment
- tangible assets (those that have a physical presence) held for more than one operating cycle or one year, whichever is longer
- temporary (nominal) account
- account that is closed at the end of each accounting period, and includes income statement, dividends, and income summary accounts
- working capital
- current assets less current liabilities; sometimes used as a measure of liquidity