Acid-test ratio: a measure of the company’s immediate short-term liquidity.
Classifies balance sheet: Abalance sheet that has sever classifications or sections.
Closing entries: Entries made at the end of an accounting period to transfer the balances of temporary accounts
(revenue, expenses, income summary, and drawings) to the permanent owner’s equity account, owner’s capital.
Closing the books: the process of journalizing and posting closing entries to update the capital account and
prepare the temporary accounts for the next period’s postings.
Correcting entries: Entries to correct errors that were made when transactions were recorded.
Current assets: Cash and other assets that will be converted to cash, sold, or used up within one year from the
balance sheet date or in the company’s normal operating cycle.
Current liabilities: obligations that are expected to be settled within one year from the balance sheet date or in
the company’s normal operating cycle.
Current ratio: Ameasure of short-term debt-paying ability that is determined by dividing current assets by
Income summary: a temporary account that is used in closing revenue and expense accounts.
Intangible assets: long lived assets that do not have physical substance and are right and privileges that result
from ownership. They include patents, copyrights, trademarks, trade names, and licences.
Liquidity: the ability of a company to pay obligations as they come due within the next year and to meet
unexpected needs for cash.