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BUSINESS FINAL > BUSINESS CHAPTER 17 > Flashcards

BUSINESS CHAPTER 17 Flashcards

1
Q

accounting cycle

A

a six-step procedure that results in the preparation and analysis of the major financial statements

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2
Q

accounting

A

the record, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions

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3
Q

who makes use of a firm’s accounting information

A

outside parties- employees, owners, creditors, unions, inventors, and the government

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4
Q

what do bookkeepers do

A

divide the firm’s transactions into meaningful categories and post them into a record book or computer program called a journal

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4
Q

Bookkeeping

A

the recording of business transactions

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5
Q

double-entry bookkeeping

A

the practice of writing every business transaction in two places; done so they can check one list of transactions against the other for accuracy

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6
Q

ledger

A

a specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place

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7
Q

trial balance

A

a summary of all the financial data in the account ledgers that ensures the figures are correct and balanced

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8
Q

how is technology used in accounting

A

-computerized accounting programs post information instantly and from remote locations
-accounting software, such as Intuit’s QuickBooks, address the specific needs of small businesses

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9
Q

financial statements

A

a summary of all the transactions that have occurred over a particular period

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10
Q

key financial statements of businesses are

A

-balance sheet
-income statement
-statement of cash flow

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11
Q

fundamental accounting equation

A

the basis for the balance sheet
assets=liabilites+owners equity
-the equation must always be balanced

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12
Q

balance sheet

A

financial statement that reports a firm’s financial condition at a specific time and is composed of three major accounts; assets, liabilities, and owner’s equity

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13
Q

assets

A

economic resources (things of value) owned by a firm; items can be tangible or intangible

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14
Q

liquidity

A

the ease with which an asset can be converted into cash

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15
Q

what are the 3 categories of assets

A

-current assets
-fixed assets
-intangible assets

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16
Q

current assets

A

items that can or will be converted into cash within one year

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17
Q

fixed assets

A

assets that are relatively permanent, such as land, buildings, and equipment

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18
Q

intangible assets

A

long-term assets (patents & copyrights) that have no physical form but do have value

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19
Q

liabilities

A

what the business owes to others (debts)

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20
Q

accounts payable

A

current liabilities involving money owed to others for merchandise or services purchased on credit but not yet paid

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21
Q

notes payable

A

short-term or long-term liabilities that a business promises to pay by a paid-back

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22
Q

bonds payable

A

long-term liabilities that represent money lent to the firm that must be paid back

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23
Q

owner’s equity

A

the amount of the business that belongs to the owners minus any liabilities owed by the business

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24
Q

retained earnings

A

the accumulated earnings from a firm’s profitable operations that were reinvested in the business and not paid out to stockholders in dividends

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25
Q

income statement

A

the financial statement that shows a firm’s profit after costs, expenses, and taxes; it summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm, expenses, and the resulting net income or net loss

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26
Q

net income / net loss

A

revenue left over after all costs and expenses; including taxes, are paid

27
Q

formula for income statement

A

revenue-costs of goods sold-gross profit-operating expenses= net income before taxes
- taxes= net income or loss

28
Q

revenue

A

the monetary value a firm received for goods sold, services rendered, or other payments

29
Q

cost of goods sold (or manufactured)

A

a measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale

30
Q

gross profit (gross margin)

A

how much a firm earned by buying (or making) and selling merchandise

31
Q

operating expenses

A

costs involved in operating a business, such as rent, utilities, and salaries

32
Q

depreciation

A

the systematic write-off of the cost of a tangible asset over its estimated useful life

33
Q

statement of cash flows

A

financial statement that reports cash receipts and disbursements related to a firm’s three major actives

34
Q

three major activities of a firm

A
  • operations
  • investments
    -financing
35
Q

cash flow

A

the difference between cash coming in and cash going out of a business

36
Q

ratio analysis

A

the assessment of a firm’s financial condition using calculations and interpretations of financial ratios developed from the firm’s financial statement

37
Q

key financial ratios

A
  • liquidity ratios
    -leverage (debt) ratios
    -profitability (performance) ratios
    -activity ratios
38
Q

liquidity ratios

A

measure a firm’s ability to turn assets into cash to pay its short-term debts

39
Q

liquidity ratios key ratios

A

-current ratio
-acid-test ratio

40
Q

where is the information about liquidity ratios found

A

on the firm’s balance sheet

41
Q

leverage (debt) ratios

A

measure the degree to which a firm relies on borrowed funds in its operations

42
Q

key rations (leverage ratios)

A

-debt to owner’s equity ratio

43
Q

profitability ratios

A
  • measure how effectively a firm’s managers are using the firm’s various resources to achieve profits
44
Q

key ratios (profitability ratios)

A
  • earnings per share (EPS)
  • return on sales
  • return on equity
45
Q

activity ratios

A

measure how effectively management is turning over inventory

46
Q

key ratios (activity ratios)

A

inventory turnover ratio

47
Q

financial accounting

A

accounting information and analyses prepared for people outside the organization

48
Q

outside users are interested in what questions? (financial accounting)

A

-is the organization profitable?
-is it able to pay its bills?
-how much debt does it owe?

49
Q

annual report

A

a yearly statement of the financial condition, progress, and expectations of an organization

50
Q

private accountant

A

an accountant who works for a single firm, government agency, or nonprofit organization

51
Q

public account

A

An accountant who provides accounting services to individuals or businesses on a fee basis.

52
Q

Certified public accountant (CPA)

A

An accountant who passes a series of examinations established by the American Institute of Certified Public Accountants (AICPA).

53
Q

Managerial accounting

A

Accounting used to provide information and analyses to managers within the organization to assist them in decision-making.

54
Q

Managerial accounting is involved with:

A

-costs of production
-costs of marketing
-preparation and control of budgets
-minimizing tax liabilities

55
Q

Auditing

A

The job of reviewing and evaluating the information used to prepare a company’s financial statements.

56
Q

Independent audit

A

An evaluation and unbiased opinion about the accuracy of a company’s financial statements.

57
Q

Tax accountants

A

An accountant trained in tax law and responsible for preparing tax returns or developing tax strategies.

58
Q

Government and not-for-profit accounting

A

Accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget.

59
Q

what is the difference between a bookkeeper and an accountant?

A

Bookkeeper’s role is to record transactions and keep you financially organized
Accountants provide consultation, analysis, and are more qualified to advise on tax matters.

60
Q

What’s the purpose of accounting journals and ledgers?

A

Accounting journals record the original transaction documents
Ledgers categorize those transactions

61
Q

Why does the bookkeeper prepare a trial balance?

A

to ensure the figures are correct and balanced

62
Q

what are the key financial statements of a business?

A
  1. balance sheet
  2. income statment
  3. statement of cash flow
63
Q

What is owner’s equity?

A

Owner’s equity= assets-liabilies

64
Q
A

BUSINESS FINAL (2 decks)

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