Financial Statements and Closing Procedures FLASHCARDS

Liquidity The ease with which an item can be converted into cash Liquidity

Reversing entries Journal entries made to reverse the effect of certain adjusting entries involving accrued income or accrued expenses to avoid problems in recording future payments or receipts of cash in a new accounting period Reversing entries

Gross profit The difference between net sales and the cost of goods sold (gross profit = net sales – cost of goods sold) Gross profit

Current ratio A relationship between current assets and current liabilities that provides a measure of a firm’s ability to pay its current debts (current ratio = current assets ÷ current liabilities) Current ratio

Classified financial statement A format by which revenues and expenses on the income statement, and assets and liabilities on the balance sheet, are divided into groups of similar accounts and a subtotal is given for each group Classified financial statement

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