CH10- Accounting

Question 1

Accounting

Answer 1

system of organizing, analyzing and reporting financial statement (focus on past)

Question 2

Financial accounting

Answer 2

based on the idea of providing financial information to external stakeholders

Question 3

Managerial accounting

Answer 3

information provided for internal stakeholders (people in the organization)

Question 4

Balance sheet (FA)

Answer 4

financial statement that outlines the financial position of a company based on asset, liability and equity

Question 5

income statement (FA)

Answer 5

financial statement that outlines profit and losses

Question 6

Statement of cash flow (FA)

Answer 6

outlines sources and uses of cash in a business

Question 7

What do accountants do?

Answer 7

• analyzing and interpreting information
• Develop budgets, cost management and asset management
• Auditing : checking/review/investigating their financial records
• Government work

Question 8

Who’s need do financial accountings address?

Answer 8

External stakeholders

Question 9

What do financial accounting do

Answer 9

• Provides financial performance as a whole
• Statements prepared by financial accountants
  
  • Balance sheet
  • Income statement
  • Statement of Cash Flow

Question 10

Accounting principles

Answer 10

regulation of the way to report financial statement (standardize )

Question 11

Balance sheet

Answer 11

Assets: what a business owns (any kind of capital, stakes in other companies)
We go from the most liquid to the least liquid
• Liabilities: what a business owes (loan, debt)
we go from most to least liquid
• Owner’s Equity: claims owners have against their own assets
• Retained earnings: net profit- dividence paied to shareholders

Question 12

Asset formula

Answer 12

Asset= liabilities + owner’s equity

Question 13

What are in income statement

Answer 13

Revenues: increases of assets as a result of selling a good or service

Expenses: resources that are used up as a result of running a business

Question 14

Net income formula

Answer 14

Revenues- expenses

Question 15

Statement of cash flow

Answer 15

Looking at the sources and uses of cash in a business

-Operating activities: Cash inflow from sale of goods/services or interest of

 securities 
(ex: you buy a hamburger, the price of the hamburger goes to the operant
 activity of the company)

- Investing activities: Cash from sale of assets or long term investments 
(ex: plot of land/ house)

-Financing activities: Cash from issuing additional shares

Question 16

Who do managerial accounting meet the need of

Answer 16

Internal stakeholders

Question 17

What do managerial accounting do

Answer 17

Go beyond financial information
Ongoing information (not just at the end of each quarter)

Question 18

What are managerial accounting responsibilities

Answer 18

Product costing
Incremental analysis
Budgeting

Question 19

What does product costing help and its component

Answer 19

Help determine inefficiencies and if a product is worth keeping in the portfolio

• Outlines the costs incurred from the production of your good

• Direct labour & direct materials costs: associated with making the product
 		(ex: Big Mac-> meat, sauce, bread, the employee)

• Overhead costs: cost that exist regardless if you are making the product or not 
	(harder to attribute to a product)
	(Ex: rent or mortgage)

• Activity-based costing (ABC): assigning a product cost based on th activity that
 	drives the cost

Question 20

Incremental analysis

Answer 20

Looking from a cost view of point.
• Evaluating the impact of different alternatives in a decision situation based on cost .

• Looking at how each alternative affects revenues and costs
• Incremental costs: difference between two decisions that u make

Question 21

Budgeting

Answer 21

• Shows how firms will acquire and use resources to achieve their goal
• Planning for accountability

• Preparing the budget
Top down (executive say what is the budget) or bottom up(get involvement of everyone to create a budget) budget
• Developing the budget

Question 22

3 types of budgets

Answer 22

Operating (sales and production goals)
Financial (financial goals/ expenditure)
Master (sales and production + financial goals)