Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

MGT8803 > Financial Accounting > Flashcards

Financial Accounting Flashcards

(103 cards)

Start Studying
1
Q

What are the 2 forms of Business we’re discussing in the class?

A

Proprietorship & Partnership and Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the Tax and Liability implications of a Proprietorship & Partnership?

A

Unlimited Liability, No Taxation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the liability and tax implications for a Corporation

A

Limited Liability and the Corporation is taxed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the Separate Entity assumption?

A

We treat the business and the owners as separate entities, focusing on the accounting for the businesses, not the owners.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the Unit of Measurement assumption?

A

The currency in which the company is operating.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the Going Concern assumption?

A

We presume that the company will continue to operate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the Periodicity assumption?

A

We presume that we can arbitrarily pick any time period that we want to and report the financial results for that time period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the Materiality assumption?

A

The only information that needs to be disclosed in financial statements is information that will be useful for those who rely on the financial statements to make decisions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Who are users of financial reports?

A

Investors (stockholders)
Creditors (banks)
Government Agencies (SEC)
Company Management
Financial Analysts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the 6 qualities of financial statements?

A

Understandability
Timeliness
Full disclosure
Comparability
Objectivity
Decision relevance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the required financial statements?

A

Balance sheet
Income statement
Statement of cash flows

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the Accounting Formula?

A

Assets = Liabilities + Owners’ Equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the definition of Assets?

A

Resources owned or rights to receive resources.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are 3 types of assets?

A

Physical - cash, buildings, inventory, equipment
Intangible - copyrights, patents, trademarks
Legal rights - right to receive payment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are some common asset accounts?

A

Cash
Accounts/Notes receivable
Inventory
Investments
Buildings & Equipment
Copyrights/patents

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How are assets ordered on the balance sheet?

A

In order of most liquid to least liquid. Cash first. Intabgibles last.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the 4 types of Valuation?

A

Historical Cost
Sales Value
Replacement Cost
General Price-level adjustment cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What valuation is given by the Cost Principle?

A

Assets are valued at their historical cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are liabilities?

A

Obligations owed to creditors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are common types of liability accounts?

A

Accounts/notes payable
Interest payable
Accrued Sales
Deferred (unearned) Revenues

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Classified balance sheets break assets and liabilities into what categories?

A

Current Assets/Liabilities (less than 1 year) and Long Term Assets/Liabilities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is Capital Stock?

A

What the company received when selling shares of its stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What are retained earnings?

A

Accumulated earnings - dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What are dividends?

A

Distribution of earning that occur when the board of directors decide to give the shareholders a bone

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
What is the formula for retained earnings??
Beginning Retained Earnings + Net Income - Dividends
26
What is the formula for (simplified) Statement of Stockholders' Equity?
Beginning Stockholders' Equity + Net Income - Dividends + Issuance of Capital Stock
27
Classify the account: Cash
Current Asset
28
Interest Expense
Expense
29
Sales Returns
Contra-Revenue
30
Wages Payable
Current Liability
31
Taxes Payable
Current Liability
32
Marketable Securities
Current Asset
33
Mortgage Payable
Long Term Liability
34
Common Stock Paid in Capital
Equity
35
Rent Expense
Expense
36
Deferred Revenues
Current Liability
37
Interest Payable
Current Liability
38
Discount on Bonds Payable
Contra-Liability (Long Term)
39
Common stock at part value
Equity
40
Prepaid Expenses
Current Asset
41
Allowance for Doubtful Accounts
Contra-Asset (Current)
42
Retained Earnings
Equity
43
Land
Long term asset
44
Bonds Payable
Long term liability
45
Treasury Stock
Contra-Equity
46
Sales
Revenue
47
Premium on Bonds Payable
Long Term Liability
48
Dividends Payable
Current Liability
49
Bad Debt Expense
Expense
50
Salaries Expense
Expense
51
Building and Equipment
Long Term Asset
52
Current Portion of Mortgage Payable
Current Liability
53
Cost of Goods Sold (COGS)
Expense
54
Sales Discounts
Contra-Revenue
55
Inventory
Current Asset
56
Goodwill
Long Term Asset
57
Depreciation Expense
Expense
58
Current Portion of Bonds Payable
Current Liability
59
Salaries Payable
Current Liability
60
Utilities Expense
Expense
61
Interest Revenues
Revenue
62
True or False: A Balance sheet shows the claims owners have against the assets of the firm
TRUE
63
True or False: Depreciation is a liability on the Balance Sheet
FALSE
64
True or False: Intangible assets are NOT an an example of a current asset
TRUE
65
What is the formula for Net Income Before Interest and Taxes?
Income before Interest and Taxes = Gross Margin - Operating Expenses Gross Margin = Sales - COGS
66
True or False: A firm's balance sheet provides a representation of the current market value for the company
FALSE
67
A Balance sheet dated December 31, 2021 represents the financial position of the firm when.
Only for December 31, 2021
68
Describe the accounting equation without using the formula
Resources of the firm equal the creditor's and owner's claim to those resources
69
What is accrual basis accounting?
In this form of accounting, revenues are recognized when earned rather than when the cash is collected
70
True or False: The income statement represents a snapshot of the firm's account balances at a point in time
FALSE that's the balance sheet
71
What is the effect on assets and liabilities on the payment of a liability?
Assets decrease and Liabilities decrease
72
What is the formula for the Interest Coverage ratio?
Earnings before interest and taxes / Interest expense
73
What is the formula for Return on Assets?
Net Income / Average total Assets
74
What is the formula for the Current Ratio?
Total current assets / Total Current Liabilities
75
What is the formula for the Quick Ratio?
Cash + Marketable Securities + Receivables / Total Current Liabilities
76
What is the formula for Return on (Average) Assets?
Net Income / Average total assets
77
What is the formula for Asset Turnover Ratio?
Sales / Average Total Assets
78
What is the formula for Gross Margin %?
Net income / Sales
79
What is the formula to determine retained earnings?
RE = RE_beginning - Net Income - Dividend
80
How do you calculate a new Bad Debt Expense?
It's the weighed average of the amount receivable to get the ending allowance, then subtract the current balance in the allowance to get the bad debt expense.
81
How do you determine the gain or loss on a bond if it's retired early?
Cash required to retire the bonds - carrying value of the bonds
82
How do you determine the dividends received by Common Shareholders?
The common shareholders get what's left after the premium shareholder's percent and anything that was retained get paid out.
83
How do you calculate total stockholder's equity from the following accounts: Common Stock, Paid-In Capital in Excess of Par, Retained Earnings, Treasury Stock
Common Stock + Paid-In Capital in Excess of Par + Retained Earnings - Treasury Stock
84
How do you Calculate Goodwill?
Goodwill Created = total amount paid - total fair value (Assets - Liabilities)
85
If bonds are issued at a PREMIUM, the stated interest rate is what in relation to the market rate of interest?
The stated interest rate for the bond is HIGHER than the market rate of interest
86
Financial statements must be consolidated when a company owns more than what percent of another company?
More than 50% of another company
87
Who owns the retained earnings of a firm?
The common shareholders
88
The direct write off approach for uncollectible accounts is...
inconsistent with the matching principle
89
If company A is a wholly owned subsidiary of Company B with their own ledgers, who should prepare the consolidated financial statements?
Only Company B
90
In periods of RISING prices, FIFO produces...
A lower cost of goods sold, higher net income, higher ending inventory costs, and higher gross margins
91
When do Contingent liabilites need to be recorded as a liability?
Only when the loss is probable and can be reasonably estimated.
92
If 25% of the common stock of an investee company is purchased as an investment, what is the appropriate method of accounting for the investment?
The Equity Method
93
How should ownership of <20% of a company's stock be reported on the financial documents?
It should be the same as Short-Term Investments
94
For Software Development, when should the R&D costs be expensed?
Software R&D are expensed until "technological feasibility" is reached. Then it can be capitalized and amortization begins on General Release.
95
What is the formula for Working Capital?
Working Capital = Current Assets - Current Liabilities
96
What is the Face Value of a bond?
Amount to pay when the bond matures (not necessarily the initial selling price of the bond)
97
What is the carrying value of a bond?
Bonds Payable +/- Premium/Discount
98
What are 4 properties of Bonds?
1. Must repay bonds 2. Must pay interest 3. Interest reduces net income 4. No dilution of ownership
99
What are 4 properties of Capital Stock?
1. No repayment of stock 2. Need not pay dividends 3. Dividends DO NOT reduce net income 4. Dilutes ownership
100
What are the 4 types of Ratios?
1. Liquidity 2. Capital Adequacy (Financial Leverage) 3. Asset Quality (Asset Management) 4. Earnings (Profitability)
101
Current Ratio and Quick Ratio measure what?
They are liquidity Ratios
102
True of False: Liquidity Ratios >1 are better
TRUE This shows that the company is liquid enough to cover it's current liabilities
103
The Debt Ratio and the Interest Coverage Ratio are what types of ratios?
Capital Adequacy Ratios

MGT8803 (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions