A company that finances a relatively large portion of its assets with liabilities is said to have a high degree of financial leverage.

Cost of goods sold is reported on the balance sheet.

The consistency principle requires a company to use the same accounting methods period after period, so that financial statements are comparable across periods.

Net Income equals assets minus liabilities.

A written promise to pay a definite sum of money on a specific future date is a note payable.

Interim financial statements refer to financial reports that cover less than one year, usually spanning one, three or six-month periods.

Liabilities are the owners claims to the business's assets.

Accumulated Depreciation is a Contra Liability Account.

Physical inventory counts are not necessary under the perpetual system.

The FIFO inventory valuation method assigns a value to the inventory on the balance sheet that approximates current cost and also mimics the actual flow of goods for most businesses.

Wages earned by employees but not yet paid are an example of an accrued liability.

A chart of accounts is prepared to verify that debits equal credits.

Double entry accounting requires that every transaction recorded must include at least one debit and at least one credit.

Double entry accounting requires that every transaction recorded must include at least one debit and at least one credit.

Accounts that appear in the balance sheet are often called temporary (nominal) accounts.

Revenue and expense accounts are permanent accounts and should not be closed at the end of the accounting period.

The first step in the accounting cycle is to analyze and record transactions and events that occur during the accounting period.

An unclassified balance sheet provides more information to users than a classified balance sheet.

Assets are often classified into current assets, investments, plant assets, and intangible assets.

Current liabilities include accounts receivable, unearned revenues, and salaries payable.

The current ratio is computed by dividing current liabilities by current assets.

Gross profit is also called gross margin.

Cost of goods sold is also called cost of sales.

The Inventory account balance at the end of one period is equal to the amount of beginning inventory for the next period.

The amount of gross profit for a merchandising company will be the same under both the accrual basis and the cash basis of accounting.