Chapter 14

Question 1

List the five steps of managerial accounting (aka cost accounting) to achieve an organization’s goals (I Made An Important Call)

Answer 1

Identifying
Measuring
Analyzing
Interpreting 
Communicating

Question 2

What is a managements greatest concern

Answer 2

Cash flow

Question 3

Top down vs bottom up management

Answer 3

Top down: begins with upper management and filters down

Bottom up: works ground up and starts with lower level

Question 4

What is the accounting equation

Answer 4

Liabilities + owner equity = assets

Question 5

List and describe the three basic accounting statements (IBS)

Answer 5

1. Income statement: report that shows an organizations profitability over a set period of time (revenue, expenses, net income)
2. Balance sheet: presents a snapshot of an organizations financial position during a specific moment in time (assets, liabilities, owners equity)
3. Statement of cash flow: shows and explains how a company’s cash flow changed from a beginning of an accounting period to the end

Question 6

Integrity in accounting requires what three things

Answer 6

1. Ethical principals
2. Compliance with professional standards and the law
3. Transparency and accuses customer to develop trust

Question 7

Describe the term “cooking the books”

Answer 7

When a business manipulates their accounting statements to make the ratios look better than they actually are

Question 8

Explain repurchase agreement

Answer 8

When assets are transferred to another entity with a contractual promise of buying them back at a set price