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ACC 202 > Exam 1 > Flashcards

Exam 1 Flashcards

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1
Q

What are the 4 broad areas of opportunities in accounting?

A

-financial
-managerial
-taxation
-accounting related

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2
Q

Ethics:

A

beliefs that separate right from wrong

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3
Q

3 factors of the fraud triangle

A

-pressure
-opportunity
-rationalization

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4
Q

Measurement(cost) principle:

A

accounting information is based on actual costs incurred in business transactions. cost is measured in cash

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5
Q

Revenue Recognition principle:

A

revenue is recognized when the good or service are provided to customer and at the amount expected to be received from the customer

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6
Q

Expense Recognition(matching) principle:

A

a company records expenses it incurred to generate revenues it reported

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7
Q

Full disclosure principle:

A

a company records the details behind financial statements that would impact users’ decisions, often in footnotes to the statements

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8
Q

What are the 3 constraints on financial reporting

A

-cost benefit
-materiality constraint
-conservatism and industry practice

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9
Q

Cost Benefit Constraint

A

information disclosed by the entity must have benefits to the user that are greater than the costs of providing it

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10
Q

Materiality constraint

A

ability of information to influence decisions

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11
Q

Accounting equation

A

Assets = liabilities + Common Stock - dividends + revenue - expenses

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12
Q

order of creation of 4 financial statements:

A

1) Income Statement
2) Statement of retained earnings
3) Balance sheet
4) Statement of cash flows

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13
Q

Return on Assets(ROA/ROI)

A

Net income / average total assets
* want a high number

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14
Q

Average total assets

A

(beginning total assets + ending total assets) / 2

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15
Q

T-Account

A

A ledger account and is used to understand the effects of one or more transactions

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16
Q

4 steps of processing transactions:

A

1) Identify transaction and source documents
2) analyze transactions using account equation
3) record journal entry
4) post entry to ledger

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17
Q

Debt Ratio:

A

total liabilities / total assets
*high ratio means a company is more likely to not pay off its debts on time
*want a low number

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18
Q

3 steps to make an adjustment

A

1) determine the current account balance
2) determine what the balance should equal
3) record the adjusting entry to get from step 1 to 2

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19
Q

Straight Line Depreciation

A

(Cost - Salvage Value) / Useful life

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20
Q

Classified balance sheet

A

organizes assets and liabilities into important subgroups
*current and non current

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21
Q

Profit Margin:

A

Net income / net sales
-for every $ in sales we make that much profit
-want to be high

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22
Q

Current Ratio:

A

current assets / current liabilities
-a company’s ability to pay its debts
-want to be high

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23
Q

Managerial Accounting:

A

provides financial and nonfinancial information to an organizations managers

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24
Q

Planning:

A

process of setting goals and making plans to achieve them

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25
2 types of planning:
Strategic: long term direction Short term: includes $ and budget
26
Control:
process of monitoring and evaluating an organizations activities and employees
27
What is the key to stopping fraud?
Prevention
28
To help prevent fraud managers set up an Internal control system to:
-ensure reliable accounting -protect assets -uphold company policies -promote efficiency
29
IMA (Institute for Management Accountants) requires management accountants to:
-be competent -maintain confidentiality -act with integrity -communicate information in a fair and credible manner
30
cost object
a product, process, department, or customer to which costs are assigned -cost is either direct or indirect
31
Direct Costs
can be cost effectively traced to a cost object. -consists of direct materials and direct labor
32
Direct Materials:
materials that are crucial parts of a finished product. -cost effectively traced through the manufacturing process to finished goods
33
Direct Labor:
employees who directly convert materials into finished goods -wages and benefits for direct labor
34
Indirect costs:
those that cannot be cost effectively traced to a cost object -includes salary of manufacturing supervisor and wages of maintenance department employees
35
Factory overhead/manufacturing overhead:
all manufacturing costs that are indirect materials, indirect labor, and other indirect costs
36
Indirect materials:
used in manufacturing that cannot be traced to finished goods -can be classified as indirect if the costs are very low
37
Indirect labor:
labor needed in manufacturing that cannot be traced to finished goods -costs of workers who assist in or supervise manufacturing but aren't mainly creating the product
38
Other indirect costs:
factory utilities, factory rent, factory depreciation, factory insurance, factory property tax
39
Prime costs:
direct materials + direct labor
40
Conversion Costs:
Direct labor + factory overhead -costs incurred in the process of converting raw materials to finished goods
41
Product costs:
production costs necessary to create a product. -Direct materials + direct labor + factory overhead
42
Period Costs:
nonproduction costs linked to a time period(not specific to products) -ex: office employee wage, office rent, delivery expense, commissions, advertising expenses
43
Reporting period costs:
go directly to the current income statement as expenses
44
Reporting product costs
first assigned to inventory, then if sold moves to COGS, if product is in inventory its on balance sheet
45
Raw materials inventory
cost of materials a company acquires to use in making products
46
Work in process inventory
consists of costs of direct materials, direct labor and overhead for partially completed products
47
Finished goods inventory
consists of the cost of direct materials, direct labor and overhead of completed products ready for sale
48
Merchandiser Balance Sheet:
current assets section of the balance sheet for a merchandiser only reports merchandise inventory rather than the 3 types of inventories
49
Merchandiser COGS
Beginning merchandise inventory + COG purchased = COG available for sale - Ending merchandise inventory = COGS
50
Manufacturer COGS
beginning finished inventory + COG manufactured = COG available for sale - ending finished inventory = COGS
51
Cost of goods manufactured:
Raw Materials Used + Direct Labor + Factory Overhead + Beginning Work in Process − Ending Work in Process
52
3 manufacturing activities are:
1) Materials Activity 2) Production activity 3) Sales activity
53
Materials Activity:
Raw materials inv beg. + raw materials purchases = raw materials available for use in production - raw materials inv ending = raw materials used in production
54
beginning work in process inventory
costs of partially complete products from prior period
55
Schedule of cost of goods manufactured (4)
1) compute direct materials used 2) compute direct labor used 3) compute factory overhead used 4) compute COG manufactured
56
Raw materials inventory turnover does what?
helps managers assess how effectively a company manages its raw materials inventory
57
Raw materials inventory turnover formula:
Raw materials used/ avg raw materials inventory *want high number
58
Average raw materials inventory:
(beg. RM inv + end. RM inv.) / 2
59
Days sales in raw materials inventory formula:
(End RM inv. / RM used) x 365
60
Days sales in RM inventory reveals...
how much raw materials inventory is available in terms of number of days sales. *prefer lower number
61
When making adjusting entries what should you never adjust?
cash
62
How do you calculate net income syd?
Revenue - expenses
63
A double-entry accounting system is an accounting system:
That records the effect of each transaction in at least two accounts, with at least one debit and one credit.
64
Total Quality Mangement
Constant focus on higher standards
65
Just in time manufacturing
receive materials, complete parts and complete products just in time for next step
66
A business's source document
identify and describe transactions and events entering the accounting system
67
Total manufacturing costs:
1) factory overhead + direct materials + direct labor 2) COG manufactured + WIP ending - WIP beginning
68
T/F: Noncurrent items are expected to come due within one year or the company's operating cycle.
False
69
are factory utilities considered period costs?
no
70
is equipment considered a plant asset?
yes(somehow???)

ACC 202 (4 decks)

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