"CLEP Financial Accounting," Vocabulary from Chapter 9

This list focuses on cash and short-term investments.

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
25 words 16 learners

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Full list of words from this list:

  1. bank
    financial institution that accepts deposits and lends money
  2. deposit
    money saved in a bank or some similar institution
  3. security
    financial instrument documenting ownership of an investment
  4. miscellaneous
    consisting of a haphazard assortment of different kinds
  5. outstanding
    owed as a debt
  6. petty
    small and of little importance
  7. realize
    earn on some commercial or business transaction
  8. gain
    earn on some commercial or business transaction
  9. term
    a limited period of time during which something lasts
  10. investment
    money that is committed with an expectation of profit
  11. trade
    a particular instance of buying or selling
  12. reconciliation
    getting two things to correspond
  13. reimburse
    pay back for some expense incurred
  14. dividend
    earnings of a corporation distributed to its shareholders
  15. corporation
    a business firm recognized by law as a single body
  16. receipt
    an acknowledgment that payment has been made
  17. idle
    not in active use
  18. available
    obtainable or accessible and ready for use or service
  19. adjusted
    altered to accommodate to certain requirements
  20. divisible
    capable of being or liable to be divided or separated
    3 ways to spot accounting mistakes on the CLEP exam:
    1. Find out how much your books are off and look for a transaction with that number in it (probably a missing debit or credit).
    2. Look for an answer that is half the number you are off (probably posted a debit as a credit or vice versa).
    3. When the amount off is divisible by 9, look for a decimal mistake or a transposition of two numbers.
  21. replenish
    fill something that had previously been emptied
    There are only two types of petty cash journal entries: (1) when the cash account is set up, and (2) when the account is replenished. The CLEP exam tries to trick students into guessing that the account goes up and down as the money is spent and replenished. It does not. It usually has only a single entry in it.
  22. maturity
    the date on which an obligation must be repaid
    Held-to-maturity investments (unlike short-term, trading, and available-for-sale) are those that the business does not intend to sell. When you see the word "investment" in a CLEP problem, check how long the business intends to keep the investment.
  23. exchange
    a workplace for buying and selling; open only to members
    On the CLEP exam, the words "stock exchange" will clue you that the security is "marketable" (able to be traded), so you must adjust the value of the stock to its market value.
  24. clue
    evidence that helps to solve a problem
    When calculating a realized gain or loss on the sale of an investment on the CLEP exam, always record cash first. Then remove the old investment at the original price. The gain or loss is whatever is necessary to make the debits equal the credits. If you need more debits, there is a loss; more credits, a gain.
  25. formula
    a statement expressing some fundamental principle
    bank reconciliation formula:
    balance per bank + deposits not shown - outstanding checks +/- bank errors = adjusted bank balance
    balance per cash account + interest income - bank fees +/- business errors = adjusted book balance
Created on November 2, 2016 (updated December 14, 2016)

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