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Business Fundamentals > Chapter 11 > Flashcards

Chapter 11 Flashcards

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1
Q

Define accounting

A

comprehensive system for collecting, analyzing, and communicating financial information

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2
Q

Define bookkeeping

A

recording accounting transactions

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3
Q

Define accounting info system (AIS)

A

organized procedure for identifying, measuring, recording, and retaining financial information

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4
Q

Who are the users of accounting info

A

Business managers
Employees and unions
Investors and creditors
Taxing authorities
Government regulatory agencies

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5
Q

Define “controller” in AIS

A

ensures that the accounting system provides the reports and statements needed for planning, controlling and decision-making; activities may need different types of accounting specialists

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6
Q

Define financial accounting

A

keeps external parties informed about the firm’s financial condition

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7
Q

Define managerial accounting

A

directed at internal parties (managers); provides information to facilitate planning, forecasting, and decision-making

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8
Q

What are the levels of professional accountants + the unified

A

Chartered (CA)
Certified general (CGA)
Certified management (CMA)
Unified to Chartered professional (CPA)

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9
Q

What accounting services exist

A

Auditing
Tax services
Management consulting services

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10
Q

Define auditing in accounting

A

Examination of financial records to ensure fair rep. (GAAP)

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11
Q

Define tax services in accounting

A

Tax return prep and tax planning

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12
Q

Define management consulting services in accounting

A

Personal financial planning to business planning

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13
Q

Define private accountants

A

Hired as salaried employees
Duties cover daily accounting needs
Small business will have just one
Larger business will have specialists (budgeting, taxation, accounts payable, etc)

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14
Q

What are the 6 steps to the accounting cycle

A
  1. Analyze transaction documents
  2. Record transactions in journal
  3. Transfer journal entries to ledger
  4. Trial balance
  5. Prep financial statements
  6. Analyze financial statements
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15
Q

Define the International Accounting Standards Board (IASB)

A

Members in 80+ countries
Goal to eliminate differences in financial reporting globally
Statements include: income statement, balance sheet, statement of cash flow

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16
Q

Define International Financial Reporting Standards (IFRS)

A

Standard accounting rules dev. by IASB
Used by publicly accountable/privately government enterprises

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17
Q

Define Accounting Standard for Private Enterprises (ASPE)

A

Standard accounting rules can be used by private businesses in Canada to prepare financial reports

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18
Q

Define an asset

A

Anything of economic value owner by firm/indiv

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19
Q

Define a liability

A

Any debt owed by firm/indiv

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20
Q

Define owners’ equity

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A

Any positive difference between firm’s assets and liabilities

21
Q

Define the double-entry bookkeeping system

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A

Transactions entered two ways showing how impact assets AND liabilities; accounting equation always kept in balance

22
Q

What is the accounting equation

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A

Assets = liabilities + owners equity

23
Q

What are the 3 important financial statements + their purpose together

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A

Balance sheets
Income statements
Statements of cash flow
Reflect activity/financial conditions of company

24
Q

Define balance sheets

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A

Provide detailed information about accounting equation factors; show firm’s financial condition at a point in time

25
What makes up a current asset
Cash Assets capable of being converted into cash within a year Accounts receivable (amount customers owe firm) Inventory (cost of merchandise not yet sold but ready for sale) Prepaid expenses (supplies onhand + bills paid for in advance)
26
Define fixed assets + what makes it up
Long-term use/value Land Buildings Machinery
27
How to calculate fixed assets depreciation
Distribute cost of major asset over lifetime, deduct yearly
28
Define intangible assets + ex
Non physical assets with economic value but difficult to calculate Patents Trademarks Franchise fees Copyright
29
Define goodwill
Amount paid for existing business beyond value of other assets
30
Define current liabilities
Debts owed by firm that must be repaid within one year (ie accounts payable)
31
Define long term liabilities
Debts owed by firm due in over a year
32
Define owners' equity
Owners' holdings in firm
33
What makes up a balance sheet
Assets, liabilities, owners equity
34
Define an income statement
Describes revenues, expenses showing firm's annual profit/loss (AKA profit-and-loss statement)
35
What is the profit equation
Revenues - expenses
36
What is included on an income statement
Net sales Cost of goods sold Gross profit Operation expenses Income
37
What is included in the statement of cash flows
Operations (g/s) Investments Financing
38
Define revenue recognition
Formal recording, reporting of revenues in financial statements once earnings cycle is completed
39
Define matching
Expenses match with revenue to show net income for accounting period
40
Define a budget
Detailed financial plan of estimated receipts/expenditures for future period
41
What does a budget requier
Internal financial statement of approx. 1 year Input from multiple departments Comparison of actual to signal problems
42
What are the 3 types of ratios that analyze financial statements
Solvency Profitability Activity
43
Define two types of solvency ratios
Short term: Current assets/current liabilities Long term: debt to equity (debt/owner equity)
44
Define profitability ratios
Return on equity: net income/total OE Return on sales: net income/sales rev Earnings per share: net income/# of common shares outstanding
45
Define activity ratios
Inventory turnover ratio (cost of goods sold/avg inventory); measures avg # of times inventory is sold and restocked during the year
46
Are ethics important in accounting
Yes because they help maintain public's confidence in institutions, financial markets, accounting professionW
47
What happens if there are no ethics in accounting
Accounting tools would be meaningless
48
What are competencies accountants should posses
Strategic thinking Problem solving Communications Leadership Dedication to meeting customer needs Tech profficient

Business Fundamentals (15 decks)

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