Ch 14

Question 1

Accounting

Answer 1

The recording classifying, summarizing, and interpreting of financial events and transactions in an organization to provide management and other interested parties the financial information they need to make good decisions about its operation

Question 2

Accounting cycle

Answer 2

A 6 step procedure that results in the preparation and analysis of the major financial statements

Question 3

Bookkeeping

Answer 3

The recording of business transactions

Question 4

Double entry bookkeeping

Answer 4

Practice of writing every business transaction in 2 place

Question 5

Ledger

Answer 5

A specialized accounting book or computer program in which the information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place

Question 6

Trial balance

Answer 6

Summary of all the financial data in the account ledger that ensures the figures are correct and balance.

Question 7

financial statement

Answer 7

summary of all the financial transactions that have occurred over a particular period

Question 8

Balance sheet

Answer 8

The financial statement that reports a firms financial conditions at a specific time

Question 9

Assets

Answer 9

economic resources owned by a firm

Question 10

Liquidity

Answer 10

The ease with which an asset can be converted into cash

Question 11

current assets

Answer 11

items that can or will be converted into cash within one year

Question 12

Fixed assets

Answer 12

Longterm assets that are relatively permanent, such as Land, buildings, and equipment

Question 13

intangible assets

Answer 13

Longterm assets that have no physical form but do have value (examples: patents, trademarks, copyrights)

Question 14

Liabilities

Answer 14

What the business owe to others (debt)

Question 15

Accounts payable

Answer 15

Current liabilities or bills the company owes others for merchandise or services it purchased on credit but has not yet paid for.

Question 16

Notes payable

Answer 16

Short term or long term liabilities that a business promises to repay by a certain date.

Question 17

Bonds payable

Answer 17

Long term liabilities, money lent to the firm by bondholders that it must pay back at a specific date

Question 18

Owners equity

Answer 18

Amount of the business that belongs to the owners minus any liabilities owned by the business

Question 19

Retained earnings

Answer 19

Accumulated earnings from the firm’s profitable operations that are reinvested in the business and not paid out to stockholders in distributions of company profits.

Question 20

Income statement

Answer 20

Financial statement that shows a firm’s profit after cost expenses and taxes; it’s summarises all of the resources that have come into the firm (revenue) , all the resources that have left the firm, expenses, and the resulting net income of a net loss

Question 21

Cost of goods sold (or cost of goods manufactured)

Answer 21

Measures the cost of merchandise the firm sells, or the cost of raw material and supplies it used in producing items for resale

Question 22

Gross profit (or gross margin)

Answer 22

How much a business earned by buying (or making) and selling merchandise

Question 23

Operating expenses

Answer 23

Cost involved in operating a business, such as rent, utilities, and salaries

Question 24

Depreciation

Answer 24

Systematic ride off of the cost of a tangible asset over its estimated useful life

Question 25

Statement of cash flow

Answer 25

Financial statement that reports cash receipts and disbursement related to the firm’s 3 major activities: operation, investment, and financing

Question 26

cash flow

Answer 26

The difference between cash coming in and cash going out of her business

Question 27

financial accounting

Answer 27

Generates financial information and analyses is for people primarily outside the organization

Question 28

Annual report

Answer 28

A yearly statement of the financial condition, progress, and expectations of an organization

Question 29

private accountant

Answer 29

Accountant who works for a single firm government agency or nonprofit organization

Question 30

Public accountant

Answer 30

Provides accounting services to individuals or business on a fee basis

Question 31

Certified public accountant (CPA)

Answer 31

An accountant who passes a series of examinations established by the American Institute of Certified Public Accountants (AICPA)

Question 32

Managerial accounting

Answer 32

Provides information and analysis to managers inside the organization to assist them in decision making

Question 33

Auditing

Answer 33

Job of reviewing and evaluating the information used to prepare a company’s financial statements

Question 34

Independent audit

Answer 34

An evaluation and unbiased opinion about the accuracy of a company’s financial statements

Question 35

Tax accountant

Answer 35

Trained in tax law and is responsible for preparing tax returns or developing tax strategies

Question 36

Government and nonprofit accounting

Answer 36

Accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget

Question 37

fundamental accounting equation

Answer 37

Assets=Liabilities+Owners equity, the basis for the balance sheet

Question 38

Journal

Answer 38

The record book or computer program where accounting data is first entered

Question 39

Net income or net loss

Answer 39

Revenue leftover after all costs and expenses including taxes are paid