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Accounting > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

External Users

A

Investors, lenders, creditors, auditors

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2
Q

Internal Users

A

Management

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3
Q

What does the Security & Exchange Commission (SEC) do?

A

-Govern publicly traded companies
-Enforce accounting standards

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4
Q

What does the Financial Accounting Standards Board do?

A

Write the accounting standards known as GAAP

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5
Q

What is GAAP?

A

Generally Accepted Accounting Principals

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6
Q

What does a 10-K Represent?

A

Annual financial reporting

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7
Q

What does a 10-Q represent?

A

Quarterly financial reporting

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8
Q

What does an 8-K represent?

A

special reports (mergers & acquisitions)

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9
Q

Fiscal Year:

A

Chosen by a company
-Ex: Farming

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10
Q

Calander Year:

A

Jan 1- Dec 31

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11
Q

What are the 4 Basic Financial Statements?

A

1.Balance Sheet
2.Income Statement
3.Statement of Retained Earnings
4.Statement of Cash Flows

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12
Q

Financial Statement Structure

A

A = L + SE
CC + REE
REb + NI - DIV
R - E

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13
Q

Balance Sheet:

A

A = L + SE
Point in time report

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14
Q

Income Statement (Profit & Loss Statement)

A

NI = R - E
Over a period of time

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15
Q

Statement of Retained Earnings:

A

REE = REB + NI - DIV
Over a period of time

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16
Q

Transaction Definition:

A

An event that has an economic impact on the business and must be recorded

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17
Q

External transaction:

A

Involves an exchange between a company and an outside party

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18
Q

Internal transaction:

A

occur within a company and have a direct financial impact

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19
Q

Journal Entry:

A

Transactions are recorded in the accounting system through a JE
-Double Entry Accounting

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20
Q

Chart of accounts

A

Details the accounts a company will use in their journal entries

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21
Q

Normal Debit Balance Accounts:

A

Expenses
Assets

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22
Q

Normal Credit Balance Accounts:

A

Revenue
Liability
Stockholder Equity

23
Q

T- Account;

A

a summary of transactions for each account

24
Q

General Ledger:

A

Summary of all T-Accounts

25
Q

Trial Balance:

A

a listing of all accounts in the general ledger with their balances
-Used for creating financial statements
-Not used for financial analysis

26
Q

Trial Balance order of accounts:

A

Assets -> Liabilities -> Stockholder Equity -> Revenue -> Expenses

27
Q

Adjusting Journal Entries adjust for 4 things:

A

1.Prepaid Items
2.Unearned Revenue
3. Receivables adjustment
4. Payables adjustment

28
Q

Revenue is recognized when…

A

earned

29
Q

Expenses are recorded when…

A

incurred (service is completed)

30
Q

Pre paid items are an…

A

Asset and record when cash is paid before the good/service is received

31
Q

Unearned revenue is a…

A

Liability and recorded when cash is received before the good/service is given

32
Q

Compound Interest Equation:

A

Interest(i) = Principal(P) x Rate(r) x Time(t)

33
Q

4 Major components of income statement is:

A

1.Revenue
2.Expense
3.Gains
4.Losses

34
Q

Gains:

A

increase to net income from peripheral transaction
-not related to direct operations
ex: selling equipment
Book Value< Market Value

35
Q

Losses:

A

decrease to net income from peripheral transaction
-not related to direct operations
ex: selling equipment
Book Value > Market Value

36
Q

Income Statement Structure:

A

1.Operating Activities
2.Gross Margine
3.Selling, general, administrative expense
4.Operating Income
5.Non operating activities
6.EBIT
7.Net Income

37
Q

Operating Activities

A

Sales Revenue and COGS

38
Q

Gross Margin

A

Sales Revenue - COGS

39
Q

Operating Income

A

Gross Margin - SGA Expenses

40
Q

Non operating activities

A

Gains and Losses

41
Q

EBIT: earnings before interest and taxes

A

Operating income - Non operating activities

42
Q

Net Income

A

EBIT - Interest/Tax Expense

43
Q

Percentage of Sales Metrics

A

Percentage of total sales for each item
-allows internal and external users to analyze each line item and compare it to prior period or other companies

44
Q

Earnings per share definition:

A

metric used to evaluate both the operating performance and profitability of a company
-EPS is required to be disclosed on the face of the income statement

45
Q

EPS Equation:

A

(Net Income - Preferred Dividends) / WANCSO

46
Q

Temporary Accounts:

A

Revenue and Expenses

47
Q

Permanant Accounts:

A

A, L, SE

48
Q

Liquidity

A

companies ability to convert assets to cash

49
Q

Solvency

A

companies ability to pay its debts on time

50
Q

Current Ratio:

A

Current Assets/Current Liabilities

51
Q

Working Capital

A

Current Assets - Current Liabilities

52
Q

Debt to Assets Ratio

A

Total Liabilities / Total Assets

53
Q

Debt to Equity

A

Total Liabilities / Total Equity

Accounting (6 decks)

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