Chapter 16 Understanding Accounting and Financial Information

Question 1

Managerial Accounting

Answer 1

Accounting used to provide information and analyses to managers inside the organization to assist them in decision making

Question 2

Financial Accounting

Answer 2

Accounting information and analyses prepared for people outside the organization

Question 3

Annual Report

Answer 3

A yearly statement of financial condition, progress and expectations of an organization

Question 4

Compliance

Answer 4

The job of reviewing and evaluating the records used to prepare a companies financial statements

Question 5

Independent Audit

Answer 5

An evaluation and unbiased opinion about the accuracy of a companies financial statements

Question 6

Forensic Accounting

Answer 6

A relatively new area of accounting that focuses its attention on fraudulent activity

Question 7

Tax Accounting

Answer 7

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

Question 8

Private Accountant

Answer 8

An accountant who works for a single firm, government agency or non-profit organization

Question 9

Public Accountant

Answer 9

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

Question 10

Chartered Accountant

Answer 10

An accountant who has met the examination, education, and experience requirements of the society of management accountants of canada

Question 11

Certified Management Accountant

Answer 11

An accountant who has met the examination, education and experience requirements of the society of management accountants of canada

Question 12

Accounting

Answer 12

The recording, classifying, summarizing and interpreting of financial events to provide management and other interested parties the financial information they needs to make good decisions

Question 13

Accounting Cycle

Answer 13

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

Question 14

Bookkeeping

Answer 14

The recording of business transactions

Question 15

Journal

Answer 15

The record book where accounting data is first entered

Question 16

Double-entry Bookkeeping

Answer 16

The concept of every business transaction affecting at least 2 accounts

Question 17

Fundamental Accounting Equation

Answer 17

Assets are equal to liabilities pus owners equity; this is the basis for the balance sheet

Question 18

Ledger

Answer 18

A specialized accounting book in which information from accounting journals is accumulated into accounts and posted so that managers can find all of the information about a specific account in one place

Question 19

Trial Balance

Answer 19

A summary of all the data in the account ledgers to show whether the figures are correct and balanced

Question 20

Financial Statement

Answer 20

A summary of all of the transactions that have occured over a particular period

Question 21

Balance Sheet

Answer 21

The financial statement that reports a firms financial condition at a specific time and is composed of 3 major types of accounts: assets, liabilities and owners equity

Question 22

Assets

Answer 22

Economic resources owned by a firm

Question 23

Liquidity

Answer 23

How fast an asset can be converted into cash

Question 24

Current Assets

Answer 24

Items that can be converted into cash within one year

Question 25

Capital Assets

Answer 25

Assets that are relatively permanent, such as land, buildings or equipment

Question 26

Intangible Assets

Answer 26

Long term assets that have no real physical form but do have value

Question 27

Liabilities

Answer 27

What the business owes to others

Question 28

Accounts Payable

Answer 28

Current Liabilities are bills a company owes to others for merchandise or services purchased on credit but not paid for yet

Question 29

Notes Payable

Answer 29

Short term or long term liabilities that a business promises to repay by a certain date

Question 30

Bonds Payable

Answer 30

Long term liabilities that represent money lent to a firm that must be paid back

Question 31

Taxes Payable

Answer 31

Sales taxes and GST or HST collected and income tax payable

Question 32

Owners Equity

Answer 32

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

Question 33

Retained Earnings

Answer 33

The accumulated earnings from a firms profitable operations that remains in the business and not paid out to shareholders or dividends

Question 34

Net income

Answer 34

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

Question 35

Gross Profit

Answer 35

How much a firm earned by buying and selling merchandise

Question 36

Operating Expenses

Answer 36

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

Question 37

Cash Flow

Answer 37

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

Question 38

Amortization

Answer 38

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

Question 39

Matching Principle

Answer 39

Revenues are recorded with earned and expenses are recorded when incurred