Understanding and Managing Money

Question 0

accounting is about?

Answer 0

systematically recording financial information to analyze business performance as precisely as possible.

Question 1

accounting is more than?

Answer 1

counting

Question 2

accounting data facilitates?

Answer 2

diagnostic tests that can help managers make better decisions and allow stakeholders, particularly investors, assess both the risk and return potential in backing an enterprise.

Question 3

Managerial accounting provides?

Answer 3

information and analysis to managers within the organization. It provides the costs of marketing, production, and employee wages, as well as preparing and monitoring budgets.

Question 4

Financial accounting produces?

Answer 4

information for use outside of a company. Financial accountants are responsible for producing annual reports required for shareholders and regulatory agencies.

Question 5

A certified management accountant (CMA)has received specialized training?

Answer 5

passed required qualifying exams, and been certified by the American Institute of Certified Management Accountants.

Question 6

A certified public accountant (CPA)has received?

Answer 6

training adequate to passing a series of examinations to be certified by the American Institute of Certified Public Accountants.

Question 7

Private accountants work for?

Answer 7

a single firm, while public accountantsoffer services for hire.

Question 8

The Financial Accounting and Standards Board (FASB) defines?

Answer 8

the generally accepted accounting principles (GAAP).

Question 9

Auditing is the process of?

Answer 9

reviewing and evaluating a company’s financial records.

Question 10

Financial records form?

Answer 10

the basis for a firm’s financial statements. Therefore, the accuracy of the records should assure accurate financial statements

Question 11

Independent auditors are expected to?

Answer 11

prepare objective and unbiased evaluations of a company’s financial records and statements.

Question 12

An internal auditor (CIA) must be?

Answer 12

Must meets the educational requirements then can he/she be professionally certified as a certified internal auditor (CIA).

Question 13

Tax accountingis a specialized field. Its practitioners are trained in?

Answer 13

tax law and its regular updates. Obviously, tax accountants are generally responsible for preparing an organization’stax returns.

Question 14

Government accounting standards are set by?

Answer 14

the Governmental Accounting Standards Board (GASB).

Question 15

Bookkeeping is simply the work of?

Answer 15

keeping track of financial transactions as they occur.

Question 16

Accountants sort these transactions into?

Answer 16

accounts through a process called double-entry bookkeeping.

Question 17

In this system, a journal is a record of?

Answer 17

transactions, like daily sales.

Question 18

The ledger sorts transactions into?

Answer 18

specific categories called accounts.

Question 19

Accounts include?

Answer 19

expense categories (utilities, supplies, wages), accounts receivable (money owed to the firm), and accounts payable (money paid to creditors).

Question 20

The Six-Step Accounting Cycle is?

Answer 20

Step 1 is analyzing and sorting documents (receipts for bills paid, sales receipts, and so on).
Step 2 is posting transactions to the journal. (The term journal, derived from French, means “daily.”)
Step 3 is posting journal entries to the ledger or ledgers. (Sometimes there are ledgers for different account categories, such as rents versus revenues and expenses related to retailing operations.)
Step 4 is producing a trial balance. A trial balance can be used to check account balances to make sure they’re accurate.
Step 5 is preparing financial statements.
Step 6 is analyzing the statements.

Question 21

The basic financial statements are?

Answer 21

the balance sheet, the income statement—also called the profit and loss statement (P&L)—and the statement of cash flows.

Question 22

A balance sheet is?

Answer 22

like a snapshot. It shows you what a firm owns or owes as of a certain date, often the last day of a quarter. The process that produces the balance sheet is called “closing the books,” because all the journal entries for a time period, posted to ledger accounts, are summed up before “opening the books” on the next business period.

Question 23

An income statement shows you?

Answer 23

a firm’s sales (and other income) relative to expenses. If income is greater than expenses (cost of sales), we have a net operating profit.

Question 24

A statement of cash flows is?

Answer 24

a sort of “money movement” track that contrasts cash coming in versus cash going out over a specific accounting period.

Question 25

The Accounting Equation is?

Answer 25

Assets = Liabilities + Owner’s Equity That’s the equation. To illustrate it with a simple example, let’s say you bought a $20,000 car. After making 20 payments (interest + principle) on your car loan, you still owe $8,500. Thus, $20,000 = $8,500 + $11,500. Your owner’s equity is $11,500.

Question 26

Assets are things of?

Answer 26

value owned by a firm. Tangible assets may include buildings, machinery, vehicles, office furniture, and fixtures that help a firm produce income. Intangible assetscan include brand names, logos, trademarks, patents, and goodwill (related to supplier and customer loyalty).

Question 27

Liquidity refers to?

Answer 27

how easily assets are convertible to cash.

Question 28

Fixed assets include?

Answer 28

land, buildings, and factory equipment, are long-term assetsthat can help the firm a get a loan but which aren’t normally liquid

Question 29

Liabilities include?

Answer 29

accounts payable, such as money owed for merchandise or services paid on credit.

Question 30

The function of the statement of cash flows is?

Answer 30

to show the amount of cash on hand at a given time.

Question 31

The flow of money in and out of a company is related to?

Answer 31

* Operations—Operations are the cash transactions that go on day-to-day as a business does business. Money comes in from sales; money goes out to buy merchandise or pay bills. * Investments—When money is used to make investments, it’s no longer available for operations; it has been invested. * Financing—Money is often raised by borrowing. Borrowed money increases operating funds while also increasing balance-sheet liabilities. Payments made on loans move cash out of operating funds

Question 32

A straight-line depreciation schedule is?

Answer 32

For example, let’s say a stamping press used in manufacturing is expected to last 10 years. If the initial cost of the machine was $20,000, that cost can be written off on what’s called a straight-line depreciation schedule. In this case, the company would write off $2,000 a year for 10 years as an operating expenseitem. Basically, depreciation allowances help reduce a company’s taxable income, therefore making it easier to replace the worn-out machine when it dies of old age.

Question 33

Liquidity ratios are?

Answer 33

Recall that liquidity is how fast an asset can be converted to cash. The question that will concern people inside or outside a business is this: Is a company’s liquidity sufficient for paying off short-term debt—debt that must be paid off in a year? To answer that question, a current ratiocan be taken from the company’s balance sheet. From that statement, you can see current assets and current liabilities. So, for example, if current assets amount to $20,000 and current liabilities amount to $ 5,000, the current ratio will be $20,000 divided by $5,000 = 4.00. The company has four dollars in cash for every one dollar of current liabilities

Question 34

Leverage (debt) ratios are?

Answer 34

These ratios are calculated by dividing total owner’s equity into total liabilities. You’ll get a percentage figure. For example, if total liabilities are $200,000 and total owner’s equity is $150,000, you’ll get (roughly) 133%. That isn’t wonderful. Any ratio over 100% suggests that a company could be a risky investment—or not. Different industries have typical leverage ratios. If a company’s debt ratio is consistent with other firms in the same industry, it might be a sound investment

Question 35

Profitability (performance) ratios can be looked at in different ways?

Answer 35

- The earnings per share (EPS) ratio is the ratio of net income after taxes to the number of outstanding shares of common stock. It gives you a dollar amount per share - Return on sales (net profit margin)is the ratio of net income to net sales. It gives you a percentage figure - Return on equityis how much was earned for each dollar invested by shareholders. It should show you how well the company manages its invested money. It’s also an investor-risk estimator. In the capitalist system, risk is expected. However, the higher the estimated risk, the higher the return expected by investors. The numerical ratio is net income after taxes divided by total owner’s equity—when the owners, of course, are shareholders.

Question 36

Activity ratios are?

Answer 36

These ratios gauge how efficiently and effectively a company converts its resources into profits. The inventory turnover ratiois a popular activity ratio. You get that number by dividing the cost of goods sold by the dollar value of average inventory. Obviously, fast turnover is better than slow turnover; inventory languishing in warehouses costs money