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BUS 200 Final > Chapter 11 > Flashcards

Chapter 11 Flashcards

(70 cards)

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1
Q

How do accountants prepare performance reports of businesses

A

accountants keep records of transactions such as taxes paid, income received, and expenses incurred—a process called bookkeeping—and they analyze the effects of these transactions on business activities.

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2
Q

what do accountants prepare

A

performance reports for owners, the public, and regulatory agencies

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3
Q

What does accounting measure

A

business performance and translates the findings into information for management decisions

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4
Q

Accounting

A

comprehensive information system for collecting, analyzing, and communicating financial information

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5
Q

Bookkeeping

A

recording accounting transactions

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6
Q

Accounting information system

A

a system used to make sure financial information is consistent and dependable.
- organized procedure for identifying, measuring, recording, and retaining financial information so that it can be used in accounting statements and management reports

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7
Q

controller

A

The individual who manages all the firm’s accounting activities.

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8
Q

financial accounting

A

EXTERNAL accounting process - a specific branch of accounting involving a process of recording, summarizing, and reporting the myriad of transactions resulting from business operations over a period of time.

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9
Q

managerial accounting

A

a method of accounting that creates statements, reports, and documents that help management in making better decisions related to their business’ performance. Managerial accounting is primarily used for internal purposes.

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10
Q

financial accounting system

A

The process whereby interested groups are kept informed about the financial condition of a firm

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11
Q

Audit

A

Audit
An accountant’s examination of a company’s financial records to determine if it used proper procedures to prepare its financial reports.

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12
Q

Forensic accountant

A

Accountants who track down hidden funds in business firms.

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13
Q

Management consulting services

A

Specialized accounting services to help managers resolve a variety of problems in finance, production scheduling, and other a

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14
Q

Private accountant

A

An accountant hired as a salaried employee to deal with a company’s day-to-day accounting needs.

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15
Q

Accounting cycle

A
  1. Analyze transaction documents
  2. Record transactions in journal
  3. transfer entries from journal to ledger
  4. Do a trial balance
  5. Prepare financial statements
  6. Analyze the financial statements
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16
Q

Accounting equation

A

Assets = Liabilities + Owners’ equity

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17
Q

Asset

A

Anything of economic value owned by a firm or individual.

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18
Q

Liability

A

Any debt owed by a firm or individual to other

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19
Q

Owner’s equity

A

Any positive difference between a firm’s assets and its liabilities; what would remain for a firm’s owners if the company were liquidated, all its assets were sold, and all its debts were paid.

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20
Q

Two sources of capital for owner’s equity

A
  1. The amount the owners originally invested 2. Profits earned by and reinvested in the company
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21
Q

Financial statements

A

Any of several types of broad reports regarding a company’s financial status; most often used in reference to balance sheets, income statements, and/or statements of cash flows

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22
Q

Current assets

A

Cash and other assets that can be converted into cash within a year.

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23
Q

Liquidity

A

The ease and speed with which an asset can be converted to cash; cash is said to be perfectly liquid.

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24
Q

Fixed assets

A

Assets that have long-term use or value to the firm, such as land, buildings, and machinery.

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25
Depreciation
Accounting method for distributing the cost of an asset over its useful life
26
Intangible assets
Non-physical assets, such as a patent or trademark, that have economic value in the form of expected benefit.
27
Goodwill
the value of the business that exceeds its assets minus the liabilities. It represents the non-physical assets, such as the value created by a solid customer base, brand recognition or excellence of management.
28
Current liabilities
Debt that must be paid within one year
29
Accounts payable
the money a company owes its suppliers for goods and services that have been provided and for which the supplier has submitted an invoice
30
Paid-in capital
Any additional money invested in the firm by the owners
31
Retained earnings
the amount of profit a company has left over after paying all its direct costs, indirect costs, income taxes and its dividends to shareholders
32
Income statement (profit-and-loss statement)
A type of financial statement that describes a firm’s revenues and expenses and indicates whether the firm has earned a profit or suffered a loss OVER A PERIOD OF TIME
33
Revenues
Any monies received by a firm as a result of selling a good or service or from other sources such as interest, rent, and licensing fees.
34
Revenue recognition
The formal recording and reporting of revenues in the financial statements.
35
Matching principle
Expenses should be matched with revenues to determine net income for an accounting period.
36
Cost of goods sold
All expenses directly involved in producing or selling a good or service during a given time period.
37
Gross profit (gross margin)
the profit a business makes after subtracting all the costs that are related to manufacturing and selling its products or services
38
Operating expenses
Costs incurred by a firm other than those included in cost of goods sold.
39
Operating income
Compares the gross profit from business operations against operating expenses.
40
Net income (net profit or net earnings)
A firm’s gross profit minus its operating expenses and income taxes.
41
Statement of cash flows
The statement of cash flows reports cash receipts and payment from operating, investing, and financial activities. OVER A PERIOD IN TIME
42
Budget
Detailed statement of estimated receipts and expenditures for a future period of time.
43
Solvency ratios
Ratios used to evaluate short term and long term risk
44
Short-term solvency ratio
Financial ratio for measuring a company’s ability to pay immediate debts
45
Current ratio
Financial ratio for measuring a company’s ability to pay current debts out of current assets
46
Debt
A company’s total liabilities.
47
Debt-to-equity ratio
A form of debt ratio calculated as total liabilities divided by owners’ equity
48
Leverage
Using borrowed funds to make purchases, thus increasing the user’s purchasing power, potential rate of return, and risk of loss.
49
Profitability ratios
Measures of a firm’s overall financial performance in terms of its likely profits; used by investors to assess their probable returns. POTENTIAL EARNINGS
50
Return on equity
A form of profitability ratio calculated as net income divided by total owners’ equity.
51
Return on sales
Ratio calculated by dividing net income by sales revenue.
52
Earnings per share
A form of profitability ratio calculated as net income divided by the number of common shares outstanding.
53
Activity ratios
measure the efficiency of a business in using and managing its resources to generate maximum possible revenue EVALUATING MANAGEMENTS USE OF ASSETS
54
Inventory turnover ratio
An activity ratio that measures the average number of times inventory is sold and restocked during the year. Cost of goods sold/ ((beginning inventory+ending inventory)/2)
55
CPA
Chartered professional accountant
56
3 types of accountants
CA - Chartered Accountant - (CPA, CA) - acts as an outside accountant for other firms. CGA - Certified General Accountant (CPA, CGA) - works in private industry or a CGA firm CMA - Certified Management Accountant - (CPA, CMA) - works in industry and focuses on internal management accounting.
57
Tax services
helping clients not only with preparing their tax returns but also with their tax planning.
58
gross profit equation
Sales revenue minus cost of goods sold
59
current ratio equation
current assets/current liabilities
60
Double entry accounting
a system that requires two book entries — one debit and one credit — for every transaction within a business. Your books are balanced when the sum of each debit and its corresponding credit equals zero
61
profit vs cash flow
Cash flow is the money that flows in and out of your business throughout a given period, while profit is whatever remains from your revenue after costs are deducted.
62
debt-to-owners'-equity ratio
Total liabilities/ owners equity shows how much debt a company has compared to its assets To describe the extent to which the firm is financed through borrowed money
63
owners equity formula
assets-liabilities
64
Balance sheet
summarizes a company’s assets, liabilities, and owners’ equity at a given POINT IN TIME.
65
The ratios that measure the solvency
The current, short-term solvency (liquidity), and debt-to-equity ratios all measure solvency—a firm’s ability to pay its debt in both the short and long terms
66
The ratios that measure profitability
Return on sales, return on equity, and earnings per share are all ratios that measure profitability
67
what does the inventory turnover ratio show
how efficiently a firm is using its funds
68
3 sections in statement of cash flows
Operating, Investing, Financing
69
The ratios that measure activity
Asset turnover ratio, Inventory ratio
70
Asset turnover ratio
Revenue/assets

BUS 200 Final (5 decks)

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