Accounting WOB test Flashcards
Accounting
Measuring, interpreting and communicating financial information to support internal and external decision making
Bookkeeping
Keeping financial records
What are the 3 goals of accounting
Analysis
Interpretation
Using information
What are the 3 steps of accounting?
Measurement
Processing
Communication
What are the 3 public accounting areas?
Audit
Tax
Consulting
What does GAAP stand for?
Generally
Accepted
Accounting
Principal
What is the definition of GAAP?
Standards and practices used by publicly held corporations in US in preparation of financial statements
What does IFRS stand for
International
Financial
Reporting
Standards
What is the definition for the IFRS
Accounting standards and practices used in many countries outside the U.S
What is the main difference between the GAAP & IFRS
GAAP- used in US only
IFRS- used outside US
External Auditors
Outside people brought in to determine if financial statements agree with GAP
Financial Accounting
Prepares financial information for users outside the organization
Management Accounting
Prepare data for use by managers within the organization
What is the main difference between financial and management accounting?
Financial = outside organization
Management = inside organization
Sarbanes- Oxley
Legislation to improve integrity and accountability of financial information
Assets
Anything of value that a business owns
Liabilities
Anything a firm owes
Owners Equity
Portion of a companies assets that belong to the owners
Assets = —– + ——–
Assets = Liabilities + owners equity
What are the two terms that describe matching principal?
Accrual and Cash basis
Accrual Basis
Revenue and expenses are recorded when transaction happens
Cash basis
Revenue and expense are recorded when money is recieved
What is the difference between accrual and cash basis
Accrual = recorded when transaction happened
Cash- recorded when money is received
Depreciation
Dollar amount of assets declining in value
Financial Accounting
Prepares financial information for users outside the organization
Management Accounting
Prepare data for use by managers within the organization
What is the main difference between financial and management accounting?
Financial = outside organization
Management = inside organization
Sarbanes- Oxley
Legislation to improve integrity and accountability of financial information
Assets
Anything of value that a business owns
Liabilities
Anything a firm owes
Owners Equity
Portion of a companies assets that belong to the owners
Assets = —– + ——–
Assets = Liabilities + owners equity
What are the two terms that describe matching principal?
Accrual and Cash basis
Accrual Basis
Revenue and expenses are recorded when transaction happens
Cash basis
Revenue and expense are recorded when money is recieved
What is the difference between accrual and cash basis
Accrual = recorded when transaction happened
Cash- recorded when money is received
Depreciation
Dollar amount of assets declining in value
Financial statement explains…
A companies performance and conditions
Balance Sheet
Statement of a firms financial positions made up of assets, liabilities and equity
Fiscal year
Any 12 consecutive months
Current Assets VS Fixed
Current: items that can be turned into cash WITHIN 1 year
Fixed Assets: assets acquired for long term use
What are 3 examples of fixed assets?
House, land, machinery
Current VS Long Term Liabilities
Current Liabilities- obligations due WITHIN a year
Long Term Liabilities: obligations due in LONGER than a year
What 2 terms describe owners equity
Common stock and retainer earnings
Common Stock VS Retainer Earnings
Common stock = stock of a company
Retainer Earnings = equity company holds on to
Income statement =
EQUATION
Revenue - expenses = net earnings
Cost of goods sold is the..
Cost of producing or acquiring a product
Gross Profit / Gross Margin =
Sales - cost of goods sold
What does EBITDA stand for?
Earnings Before Interest Taxes Depreciation Amortization
Net income (aka bottom line) =
Revenue- expenses
Statement of Cash Flow
Shows where cash is spent and made
True or False
Companies interpret GAP the same
False
All companies interpret GAP differently
What are financial statements used for?
Evaluating a companies financial health
Return on Sales =
net sales
Return on Equity =
total owners equity
Earnings per share =
average number of shares
Working capital =
Current assets - current liabilities
Current Ratio is
Current Liabilities
Quick Ratio (3 parts) =
Current Liabilities
Inventory Turnover Ratio =
average inventory
Accounts Receivable Turnover Ratio
Average accounts receivable
Debt to Equity Ratio
Total Equity
Debt to Asset Ratio
Total Assets
What kind of cash basis does Mikes Bikes use?
On a modified cash basis
In Mikes Bikes share price is a function of…
Profitability and Riskiness
