Powerpoint 6 Flashcards Preview

accounting > Powerpoint 6 > Flashcards

Flashcards in Powerpoint 6 Deck (14)
Loading flashcards...
1
Q

Which operating cycle is longer?

A

Merchansing operating cycle > Service company op. cycle

2
Q

Under a periodic system, Cost of Goods Sold is determined at the __________________

A

end of the period

3
Q

Purchases account for periodic

A

used rather than inventory account

normal balance = debit

4
Q

For periodic, instead of inventory account, use:

A

Purchase Returns and Allowances

Purchase Discounts

Freight Costs on Purchases

5
Q

Perepetual system Cost of Goods Sold

A

An entry is made to record cost of goods sold each time a sale is made

6
Q

Periodic system Cost of Goods Sold

A

The balance of cost of goods sold is not determined until the end of the period

Beginning inventory

+

Cost of goods purchased = Cost of Goods available for sale

-

Ending Inventory

= Cost of Goods Sold

7
Q

Operating vs. Non-operating

A

operating income as recurring

non-operating activities as nonrecurring

*When forecasting next year's income, analysts put the most weight on this year's operating income and NOT on non-operating income

8
Q

Gross Profit Rate

A

Gross Profit

Net Sales

Gross profit measured as a percentage of net sales (profitability)

Measures the margin by which selling price exceeds cost of goods sold

ex. 45% (selling price exceeds cost of goods sold by 45%)

9
Q

Profit Margin Ratio

A

Net Income

Net Sales

*Measures the percentage of each dollar of sales that results in net income

*Measures the extent by which selling price covers all expenses

10
Q

To improve profit margin ratio:

A

Increase Gross Profit Rate

and/or

Control Operating Expenses and Other Costs

11
Q

High Turnover Industries and Profit Margin Ratio

A

Usually experience low profit margins

12
Q

Quality of Earnings Ratio

A

Net Cash Provided by Operating Activities

Net Income

13
Q

Greater than 1 Quality of Earnings Ratio

A

Company is using conservative accounting techniques, delay recognition of income

14
Q

Less than 1 Quality of Earnings Ratio

A

Company is using more aggressive accounting techniques to accelerate income recognition