Accounting cycle
The accounting process that begins with analyzing and journalizing transactions and ends with the post-closing trial balance.
Closing entries
The journal entries that transfer the balances of temporary accounts to permanent accounts at the end of the accounting period
Closing process
The process of transferring the balances of temporary accounts to permanent accounts at the end of the accounting period.
Closing the books
The process of transferring the balances of temporary accounts to permanent accounts at the end of the accounting period.
Current assets
Cash and other assets that are expected to be converted to cash or sold or used up, usually within one year or less, through the normal operations of the business.
Current liabilities
Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets.
Current ratio
A financial measure expressing the relationship between current assets and current liabilities used for evaluat-ing a business’s short-term liquidity and solvency; computed by dividing current assets by current liabilities.
Liquidity
The ability to convert assets into cash.
Long-term liabilities
Liabilities that will not be due for a long time (usually more than one year).
Notes receivable
A customer’s written promise to pay an amount and possibly interest at an agreed-upon rate; amounts that customers owe for which a formal, written instrument of credit has been issued.
Permanent accounts (or real accounts)
Term for balance sheet accounts because they are relatively permanent with balances that carry forward from year to year.
Property, plant, and equipment
Long-term or relatively permanent tangible assets such as equipment, machinery, and buildings that are used in normal business operations.
Solvency
The ability of a business to pay its debts as they come due.
Temporary accounts (or nominal accounts)
Term for income statement accounts because their balances relate to only one period and are not carried forward to the next period
Working capital
The excess of the current assets of a business over its current liabilities.
