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WGU C708 Principles of Finance Study Guide 2023 Complete Solutions Verified
1.Matching Principle: The revenues and the expected incurred to
generate those revenues must be reported together; a fundamental component of accrual-based accounting.
2.Historical Cost Principle: Items that appear on the financial
statement are listed at the cost when purchased.
3.Current Assets: Cash or assets that will be converted into cash within
the next year.
4.Gross Fixed Assets: Property, Plant, and Equipment (PP&E). These
are on the books at their historical cost. This does not include accumulated depreciation (do not consider accumulated depreciation when calculating cash flows). 1 / 2
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5.Liquidity: The more liquid the asset, the more quickly it can be
turned into cash; measures how quickly an asset can be turned into cash without taking a large discount in value.
6.Marketable Securities: Short-term, high-quality securities such as
Treasury Bills and certificates of deposit (CDs).
7.Contra-Asset Account: A balance/reserve account that decreases the
balance of an Accounts Receivable (AR) account if there is doubt that all payments will be made to the firm to an amount that they expect to collect.
8.Inventories: Includes raw material, work-in-progress, and finished
goods. They are the least liquid.
9.Last In, First Out (LIFO): Assumes that the last inventory items
purchased by the company are the first ones sold to customers.
10.First In, First Out (FIFO): Assumes that the first units purchased are
the first sold.
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