Exam 2 (Chapters 2,3,7, & 13) Flashcards Preview

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Flashcards in Exam 2 (Chapters 2,3,7, & 13) Deck (39)
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1

Assets

Are the resources owned by a company from which future economic benefits are expected.

2

Liabilities

(referred to as debts) Are obligations of an entity arising from past transactions, the settlement of which may result in the transfer or use of assets

3

Owner's Equity

Is ownership right to the owners of the entity in the assets that remain after deducting the liabilities

4

Revenues

(referred to as sales) Represents the dollar amount of assets consumed (or liabilities incurred) or services used in the process of generating revenues

5

Transactions

An exchange between two parties or some other economic event that affects a company's assets, liabilities or owners' equity

6

Income Statement

(referred to as a profit and loss statement or statement of operations) Summarizes a company's revenues and expenses and can be expressed mathematically as Revenues - Expenses = Net Income

7

Balance Sheet

(referred to as statement of financial position) Summarizes a company's assets, liabilities and owner's equity and can be expressed mathematically as Assets = Liabilities + Stockholders' Equity

8

Retained Earnings Statement

Reports the changes that occurred in retained earnings for the period and can be expressed mathematically as BGN retained earnings + Net income - Dividends = END retained earnings

9

Statement Of Cash Flow

Shows the entity's sources and uses of cash related to operating activities, investing activities, and financing activities

10

Operating Activities

Include cash inflows and outflows related to the production and sale of products or services

11

Investing Activities

Include cash inflows and outflows related to buying or selling long-term assets

12

Financing Activities

Include cash inflows and outflows related to the entity's owners or long-term creditors such as a bank

13

Depreciation

The process of allocating the cost of a long-term asset over its useful life; the systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life

14

Accumulated Depreciation

The sum of all of the previous depreciation amounts taken over the course of a long-term asset's life

15

Accounting Framework

Visual representation of the impact transactions have on a company's balance sheet and/or income statement

16

Master Budget

Includes the future operating plans of a company expressed in financial terms and is made up of individual detailed budgets

17

Sales Budget

Estimates the quantity of sales

(Units Forecasted) x (Selling Price) = Total Sales

18

Production Budget

Estimates the number of units to be manufactured to meet budget sales and desired inventory levels

Integrated with the sales budget to ensure that production and sales are kept in balance during the year

(Quantity Sold) - (BGN Inv.) + (END Inv.) = Purchases
→ (Purchases)(Cost per Unit) = Cost of Purchases

19

Direct Labor Cost Budget

Estimates the direct labor hours and related cost needed to support budgeted production

20

Direct Materials Purchased Budget

Estimates the quantities of direct materials to be purchased to support budgeted production and desired inventory levels

Integrated with the production budget to ensure that production is not interrupted during the year

21

Factory Overhead Cost Budget

Estimates the cost for each item of factory overhead needed to support budgeted production

Integrated with the production budget to ensure that production is not interrupted during the year

22

Cost Of Goods Sold Budget

Prepared by integrating the following budgets: Directed materials purchased budget, Direct labor cost budget, and Factory overhead cost budget

23

Budgeted Income Statement

Prepared by integrating the following budgets: Sales budget, Cost of goods sold budget, and Selling and administrative expenses budget

Reflects the operating activities of the company

24

Balanced Sheet Budget

Described and illustrated: Cash budget (financing activity) and Capital expenditures budget (investing activity)

Reflects the financing and investing activities

25

Cash Budget

Estimates the expected receipts (inflows) and payments (outflows) of cash for a period of time

Integrated with the various operating budgets

Capital expenditures budget, dividends, and equity or long-term debt financing plans of the company affect the cash budget

(BGN Cash Balance) + (Cash Receipts) - (Cash Disbursements) = END Cash Balance

26

Capital Expenditures Budget

Summarizes plans for acquiring fixed assets

Prepared for five to ten years into the future

Integrated with the operating and financing budgets

Affect the cash budget

27

Standard Cost

A budget for the production costs of a single unit including the quantity of input as well as the cost of that input

28

Budget Flow Chart

Sales Budget → Production Budget → DM, DL, OH Budget → "COGS" Budget → Budgeted Income Statement

Sales Budget → Selling & Admin Expense Budget → Budgeted Income Statement

29

Financial Statement Flow Chart

Income Statement → Retained Earning Statement → Balanced Sheet

30

Accruals

Recognition of revenue when earned or expenses when incurred regardless of when cash is received or disbursed

Activity → Cash