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Flashcards in Accounting WOB test Deck (65):
1

Accounting

Measuring, interpreting and communicating financial information to support internal and external decision making

2

Bookkeeping

Keeping financial records

3

What are the 3 goals of accounting

Analysis
Interpretation
Using information

4

What are the 3 steps of accounting?

Measurement
Processing
Communication

5

What are the 3 public accounting areas?

Audit
Tax
Consulting

6

What does GAAP stand for?

Generally
Accepted
Accounting
Principal

7

What is the definition of GAAP?

Standards and practices used by publicly held corporations in US in preparation of financial statements

8

What does IFRS stand for

International
Financial
Reporting
Standards

9

What is the definition for the IFRS

Accounting standards and practices used in many countries outside the U.S

10

What is the main difference between the GAAP & IFRS

GAAP- used in US only
IFRS- used outside US

11

External Auditors

Outside people brought in to determine if financial statements agree with GAP

12

Financial Accounting

Prepares financial information for users outside the organization

13

Management Accounting

Prepare data for use by managers within the organization

14

What is the main difference between financial and management accounting?

Financial = outside organization

Management = inside organization

15

Sarbanes- Oxley

Legislation to improve integrity and accountability of financial information

16

Assets

Anything of value that a business owns

17

Liabilities

Anything a firm owes

18

Owners Equity

Portion of a companies assets that belong to the owners

19

Assets = ----- + --------

Assets = Liabilities + owners equity

20

What are the two terms that describe matching principal?

Accrual and Cash basis

21

Accrual Basis

Revenue and expenses are recorded when transaction happens

22

Cash basis

Revenue and expense are recorded when money is recieved

23

What is the difference between accrual and cash basis

Accrual = recorded when transaction happened

Cash- recorded when money is received

24

Depreciation

Dollar amount of assets declining in value

25

Financial Accounting

Prepares financial information for users outside the organization

26

Management Accounting

Prepare data for use by managers within the organization

27

What is the main difference between financial and management accounting?

Financial = outside organization

Management = inside organization

28

Sarbanes- Oxley

Legislation to improve integrity and accountability of financial information

29

Assets

Anything of value that a business owns

30

Liabilities

Anything a firm owes

31

Owners Equity

Portion of a companies assets that belong to the owners

32

Assets = ----- + --------

Assets = Liabilities + owners equity

33

What are the two terms that describe matching principal?

Accrual and Cash basis

34

Accrual Basis

Revenue and expenses are recorded when transaction happens

35

Cash basis

Revenue and expense are recorded when money is recieved

36

What is the difference between accrual and cash basis

Accrual = recorded when transaction happened

Cash- recorded when money is received

37

Depreciation

Dollar amount of assets declining in value

38

Financial statement explains...

A companies performance and conditions

39

Balance Sheet

Statement of a firms financial positions made up of assets, liabilities and equity

40

Fiscal year

Any 12 consecutive months

41

Current Assets VS Fixed

Current: items that can be turned into cash WITHIN 1 year

Fixed Assets: assets acquired for long term use

42

What are 3 examples of fixed assets?

House, land, machinery

43

Current VS Long Term Liabilities

Current Liabilities- obligations due WITHIN a year

Long Term Liabilities: obligations due in LONGER than a year

44

What 2 terms describe owners equity

Common stock and retainer earnings

45

Common Stock VS Retainer Earnings

Common stock = stock of a company

Retainer Earnings = equity company holds on to

46

Income statement =
(EQUATION)

Revenue - expenses = net earnings

47

Cost of goods sold is the..

Cost of producing or acquiring a product

48

Gross Profit / Gross Margin =

Sales - cost of goods sold

49

What does EBITDA stand for?

Earnings
Before
Interest
Taxes
Depreciation
Amortization

50

Net income (aka bottom line) =

Revenue- expenses

51

Statement of Cash Flow

Shows where cash is spent and made

52

True or False

Companies interpret GAP the same

False

All companies interpret GAP differently

53

What are financial statements used for?

Evaluating a companies financial health

54

Return on Sales =

Net income
------------
net sales

55

Return on Equity =

net income
------------
total owners equity

56

Earnings per share =

Net income
---------------------
average number of shares

57

Working capital =

Current assets - current liabilities

58

Current Ratio is

Current Assets
--------------------
Current Liabilities

59

Quick Ratio (3 parts) =

Cash + marketable securities + receivables /
-------------------------
Current Liabilities

60

Inventory Turnover Ratio =

Cost of goods sold
-----------------------
average inventory

61

Accounts Receivable Turnover Ratio

Net sales
-------------
Average accounts receivable

62

Debt to Equity Ratio

Total Liabilities
----------------
Total Equity

63

Debt to Asset Ratio

Total Liabilities
--------------
Total Assets

64

What kind of cash basis does Mikes Bikes use?

On a modified cash basis

65

In Mikes Bikes share price is a function of...

Profitability and Riskiness

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