Foundations of Accounting (Linkedin Learning)

Question 1

Four basic types of accounting?

Answer 1

Bookkeeping, Financial, Managerial, Income Tax

Question 2

Def: Bookkeeping

Answer 2

The presentation of a systematic, quantitative record of an activity

Question 3

Def: Financial Accounting

Answer 3

The summary of results of a business for external audiences

Question 4

Def: Balance Sheet

Answer 4

Lists an organization’s assets/resources and liabilities/obligations

Question 5

Def: Managerial Accounting

Answer 5

The summary of detailed, private information used to help an organization plan, control, and evaluate its operations

Question 6

When is income taxed?

Answer 6

Income is taxed when it is earned (since the person now has the ability to pay)

Question 7

Accounting Equation

Answer 7

Assets = Liabilities + Equity

Question 8

Def: Assets

Answer 8

Resources owned or controlled by a company with probably future benefit

Question 9

Def: Receivables

Answer 9

A contract guaranteeing you will receive money in the future

Question 10

Def: Liabilities

Answer 10

Obligations that will require future sacrifice, either by paying assets or delivering services

Question 11

Def: Owner’s Equity

Answer 11

The amount owners have invested in a company

Question 12

Def: Paid-in-Capitial

Answer 12

Owner’s personal investment in their business (from personal account)

Question 13

Def: Retained Earnings

Answer 13

Earnings reinvested into the business

Question 14

Def: Dividends

Answer 14

The amount of profits the owners have removed from the business

Question 15

Def: Short term

Answer 15

In the accounting sense, less than a year

Question 16

Def: Accounts Payable

Answer 16

Amount owed to suppliers for inventory that was received but not paid for

Question 17

What does high accounts payable mean about the trust suppliers have for the company?

Answer 17

Suppliers have high trust that they will settle their accounts payable

Question 18

Two major limitations of the balance sheet?

Answer 18

1) Reflect the costs at time of acquisition and not current market value
2) Intangible assets are not recorded (name, logo, customer loyalty)

Question 19

Three key financial reports?

Answer 19

Balance Sheet, Income Statement, Statement of Cash Flows

Question 20

Balance sheet captures this time period?

Answer 20

It’s a snapshot of a point in time

Question 21

Income statement captures this time period?

Answer 21

It’s captures a period of time for which is was written (month, quarter, year, etc)

Question 22

Def: Net Income

Answer 22

Revenue - Expenses

Question 23

Def: Revenue

Answer 23

Amount of assets created from the sale of goods and services

Question 24

Def: Expenses

Answer 24

Amount of assets consumed through business operations

Question 25

Def: Earnings

Answer 25

Earnings is synonymous with net income

Question 26

Earnings per share (EPS)

Answer 26

Net Income divided by the number of ownership shares

Question 27

What is Top-line Revenue?

Answer 27

Total Revenue on the Income Statement

Question 28

What is the bottom line?

Answer 28

Synonymous with Net Income

Question 29

Profit Margin

Answer 29

Net Income divided by Total Revenue

Question 30

What does profit margin of 2% mean?

Answer 30

That means on every 100 dollars of revenue the company makes 2 dollars of profit. Or for every dollar of revenue the company makes 2 cents

Question 31

What is the purpose of the Statement of Cash Flow?

Answer 31

Report the amount of cash collected and cash paid by a company during a period of time.

Question 32

Three categories of a statement of cash flow?

Answer 32

Operating activities, investing activities, financing activities

Question 33

Def: Operating Activities

Answer 33

Cash coming in and out of the business due to everyday operations of the business

Question 34

Def: Investing Activities

Answer 34

Cash coming in and out of the business effecting the productive capacity of the business

Question 35

Def: Financing Activities

Answer 35

Cash coming in and out of the business raised to pay for the operations and investing activities

Question 36

Def: Cash Cow

Answer 36

Operating Inflow is much larger than investing outflow

Question 37

Def: Return on Investment (ROI)

Answer 37

Measurement that combines sales profitability and operational efficiency

Question 38

Three pieces of product costing?

Answer 38

Direct Materials, Direct Labor, and Overhead Costs

Question 39

Def: Direct Material

Answer 39

"stuff" a product is made out of

Question 40

Def: Direct Labor

Answer 40

cost of labor a product takes to produce (amount of time * hourly rate of labor involved)

Question 41

Def: Overhead costs

Answer 41

cost of infrastructure and utilities used in the production of a product

Question 42

What is the traditional approach to assigning overhead costs?

Answer 42

assign a proportion based on the amount of labor hours for a product

Question 43

Def: Break Even Analysis

Answer 43

Analysis of the fixed and variable costs in an operation and the amount of "sales" needed to recoup initial investment

Question 44

Def: Variable Costs

Answer 44

Costs that fluctuate depending on the quantity of products/services that are delivered

Question 45

Def: Contribution Margin

Answer 45

Profit per customer after subtracting variable costs

Question 46

Def: Budgeting

Answer 46

Systematic quantitative plans on paper to predict the future

Question 47

Why is performance evaluation a part of managerial accounting?

Answer 47

Find the right thing to measure and you will never have to remind your employees

Question 48

How can mission statements help managerial accounting?

Answer 48

They show you where accounting measures should be directed

Question 49

Why is it hard for governments to collect income tax?

Answer 49

1) What counts as income? 2) How do you verify this income? 3) What are acceptable deductions? 4) How do you collect it?

Question 50

What taxes have governments historically relied on instead of income taxes?

Answer 50

Property tax, head taxes, and import/export fees

Question 51

Def: Average Tax Rate

Answer 51

Taxes Owed divided by the income

Question 52

Def: Marginal Tax Rate

Answer 52

rate you will pay on the next dollar of income you make

Question 53

Def: Progressive Tax System

Answer 53

A tax system is progressive when the average tax rate increases as you make more money

Question 54

Where are tax deductions applied?

Answer 54

Tax deductions reduce your taxable income

Question 55

Where are tax credits applied?

Answer 55

Tax credits are removed from the amount of taxes owed

Question 56

Def: Ordinary Income

Answer 56

Wages, salary, and interest on savings

Question 57

Def: Capital Gains

Answer 57

Income or profits made from an investment

Question 58

Capital Gain Tax Shelters

Answer 58

These take many forms but they structure your income so it can be classified as capital gains income