accounting

Question 1

Statement of Owners’ Equity

Answer 1

A summary of the transactions during a specific time period that impacted the owners’ interests in the company.

Question 2

Balance Sheet

Answer 2

Summary at a specific date of the assets, liabilities, and owners’ equity for a company.

Question 3

Liabilities

Answer 3

Obligations, in dollars, that the company has to repay for money it has been loaned, used to pay for products/services, or to fulfill other commitments. right hand of the balance sheet

Question 4

Inventory

Answer 4

Cost of the raw materials, work-in-progress, and finished goods owned by the company.

Question 5

Equity

Answer 5

the dollar amounts of the owners’ investment in the company

Question 6

Payable to Shareholders

Answer 6

Dividends on stock that are promised or declared by the company but yet to actually be paid in cash.

Question 7

Assets

Answer 7

Resources, measured in dollars, that are owned by the company and are expected to provide future financial benefits. left hand side

Question 8

Accounts Payable

Answer 8

Amount owed to suppliers for merchandise the company has purchased on credit and hasn’t yet paid.

Question 9

Operating Expenses

Answer 9

Costs incurred from staying in business, such as R&D and administration.

Question 10

Net Income

Answer 10

The difference between all revenues and all costs and expenses, resulting in the after tax measure of a company’s performance.

Question 11

Revenues

Answer 11

Result of the company’s sales and yield an increase in owner’s equity.

Question 12

Gross Margin

Answer 12

Difference between cost of merchandise and sales price.

Question 13

accounting

Answer 13

the system a business uses to identify, measure, and communicate financial information to others, inside and outside the organization

Question 14

financial accounting is

Answer 14

concerned with preparing financial information for users outside of the organization

Question 15

management accounting is

Answer 15

concerned with preparing data for managers within the organization

Question 16

What is GAAP

Answer 16

stands for generally accepted accounting principles, and all U.S public companies must prepare their published financial statements according to generally accepted accounting principles

Question 17

Why do we use GAAP

Answer 17

allows us to compare companies across sectors –> because there is a standard by which we report our finances, we can trust our analysis

Question 18

what is a certified public accountant (CPA)

Answer 18

professionally licensed accountants who meet certain requirements for education and experience and who pass a exam

Question 19

what are public accountants

Answer 19

professionals who provide accounting services to other businesses and individuals for fee

Question 20

what is audit

Answer 20

formal evaluation of the fairness and reliability of a client’s financial statement

Question 21

what are internal auditors

Answer 21

employees who analyze and evaluate a company’s operations and date to determine their accuracy

Question 22

what are private accountants

Answer 22

In-house accountants employed by organizations and businesses other than a public accounting firm; also called corporate accountants

Question 23

what is cost accounting

Answer 23

focused on the calculation of manufacturing and storage costs of products for use or sale in a business

Question 24

tax accounting

Answer 24

focused on tax preparation and tax planning

Question 25

What is the accounting equation

Answer 25

assets = liabilities + owner's equity

Question 26

what is the matching principal

Answer 26

fundamental principle requiring that expenses incurred in producing revenue be deducted from the revenues they generate during an accounting period

Question 27

different ways to achieve the matching principal

Answer 27

accrual basis, cash basis, depreciation

Question 28

What is accrual basis

Answer 28

accounting method in which revenue is recorded when a sale is made and expense is recorded when it is incurred. bigger companies do this

Question 29

Give an example of accrual basis

Answer 29

You do a job in April but don’t get paid until May→ With accrual accounting, you record the income in April (when you did the work)

Question 30

what is cash basis

Answer 30

Revenue is recorded when payment is received and expense is recorded when cash is paid. smaller businesses tend to do this

Question 31

give an example of cash basis

Answer 31

You do the same job in April, get paid in May→ With cash accounting, you record the income in May (when you got the cash).

Question 32

what is depreciation

Answer 32

accounting procedure for systematically spreading the cost of a tangible asset over its estimated useful life

Question 33

Example of depreciation

Answer 33

accounting for an asset's depreciation (lowering in quality) over time in financial statements

Question 34

what does a balance sheet

Answer 34

shows if a company is doing a good job managing it's assets and liabilities + helpful for tracking their financial management

Question 35

what are current assets

Answer 35

cash and items that can be turned into cash within one year

Question 36

what are fixed assets

Answer 36

assets for long-term use like land, buildings, machinery, and equipment. often called Property, plant, and equipment

Question 37

current liabilities

Answer 37

obligations that must be met within a year --> can compute a ratio (current assets/current liabilities) to capture whether a company can generate cash rly quickly to wipe out their obligations (their liquidity)

Question 38

long-term liabilities

Answer 38

long-term debt. obligations that fall due more than a year from the date of the balance sheet

Question 39

For a Corporation (with shareholders), Owner’s Equity Includes

Answer 39

Common Stock (or Paid-In Capital) – Money that shareholders put into the company by buying shares. and Retained Earnings – The profits the company keeps instead of giving out as dividends to shareholders.

Question 40

what is an income statement

Answer 40

financial record of a company's revenues, expenses, and profits over a given period of time

Question 41

what income statements broken down into

Answer 41

revenues: amount earned from sales of goods/services and inflow from random sources like interest, rent, and royalties. Expenses: costs created in the process of generating revenues. Net income: profit earned or loss incurred by a firm, determined by subtracting expenses from revenues. also called the bottom line

Question 42

What is Cost of Goods sold

Answer 42

It allows companies to see how much they profited and how much it costs to make their goods

Question 43

how do you find the beginning inventory

Answer 43

actual starting inventory x how much it cost to produce

Question 44

whats the costs of goods sold equation

Answer 44

Cost of Goods Sold= beginning inventory + net purchases - ending inventory

Question 45

whats gross profit

Answer 45

amount remaining when the cost of goods sold is deducted from net sales. aka gross margin

Question 46

what are operating expenses

Answer 46

indirect costs--not tied directly to making products, but necessary to run the business like ads, rent, salaries, long term assets

Question 47

within operating expenses you have

Answer 47

selling expenses: all the operating expenses associated with marketing goods or services general expenses: operating expenses (like office and administrative expenses) not directly associated with creating or marketing a good or service