"CLEP Financial Accounting," Vocabulary from Chapter 4

This list focuses on watching over cash.

Here are links to all the chapters of the test prep book published by Research & Education Association: Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, Chapter 6, Chapter 7, Chapter 8, Chapter 9, Chapter 10, Chapter 11, Chapter 12, Chapter 13, Chapter 14, Chapter 15, Chapter 16, Chapter 17, Chapter 18, Chapter 19, Chapter 20
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Full list of words from this list:

words only definitions & notes
  1. flow
    something that resembles a stream in moving continuously
  2. period
    an amount of time
  3. operation
    a business especially one run on a large scale
  4. finance
    obtain or provide money for
  5. method
    a way of doing something, especially a systematic way
  6. indirect
    not leading by a straight line or course to a destination
    The indirect method is the usual method of computing cash flow from operations. It starts with net income (unlike the direct method) and uses the changes in the asset and liability accounts to adjust net income into cash flow from operations. The CLEP will test your skill only of the indirect method.
  7. category
    a general concept that marks divisions or coordinations
  8. term
    a limited period of time during which something lasts
  9. certificate
    a formal documentation of a fact of relevance to finance
  10. deposit
    money saved in a bank or some similar institution
  11. stock
    a certificate documenting a shareholder's ownership
  12. investment
    money that is committed with an expectation of profit
  13. loan
    the temporary provision of money (usually at interest)
  14. principal
    the original amount of debt on which interest is calculated
  15. increase
    a quantity that is added
  16. decrease
    the amount by which something lessens
  17. value
    a numerical quantity measured or assigned or computed
  18. section
    one of the portions which together constitute a whole
  19. presentation
    a visual representation of something
  20. source
    a facility where something is available
  21. positive
    greater than zero
    There is no need to memorize whether a number should be positive or negative. Just determine whether cash is coming in or going out. If it is coming in, show it as a positive number. If it is going out, show it as a negative number (by putting it in parentheses).
  22. principle
    a rule or standard especially of good behavior
    Interest expense rule: the interest expense is included in the net income number at the start of the cash flow from operations section and is not backed out. There will never be a line adjusting for interest expense. Principal paid is a negative number in the cash flow from financing activities section.
  23. formula
    a statement expressing some fundamental principle
    --cash from operations + cash from investing activities + cash from financing activities = total change in cash
    --total change in cash + cash beginning of period = cash end of period
  24. column
    a vertical array of numbers or other information
    In a cash flow worksheet where Column A is the beginning balance in all accounts and Column B is the ending balance, when calculating the change in Column C, use Column A - Column B to calculate the change in asset accounts. Use Column B - Column A for the change in liability and equity accounts. The resulting positive numbers are all increases in cash, and negative numbers are decreases.
  25. clue
    evidence that helps to solve a problem
    Know where to look for information to make a financial statement:
    --balance sheet: assets, liability, and equity accounts
    --income statement: income and expense accounts
    --statement of cash flow: the change over the period in all the accounts
Created on Wed Nov 02 11:29:46 EDT 2016 (updated Tue Dec 13 15:28:32 EST 2016)

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