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Business Administration > Ch11 > Flashcards

Ch11 Flashcards

1
Q

accounting

A

comprehensive system for collecting, analyzing, and communicating financial information

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2
Q

bookkeeping

A

recording accounting transactions

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3
Q

accounting information system (AIS)

A

organized procedure for identifying, measuring, recording, and retaining financial information so it can be used in accounting statements and management reports

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4
Q

who uses accounting informatioN?

A

business managers – set goals and develop plans
employees and unions – to get paid and to plan for/receive benefits (retirement, health care, etc)
investors – to estimate return to stockholders, company’s growth prospects
tax authorities – to plan for tax inflows and ensure payments are made on time
government regulatory agencies – to fulfill duties )ensurepotential investors have valid info)

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5
Q

controller

A

person who manages all of the firm’s accounting activities

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6
Q

financial accounting system

A

process whereby interested groups outside of the company (such as stockholders, unions, etc) are kept informed about the financial condition of the firm

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7
Q

managerial accounting

A

internal procedures that allow managers to spot problems and help them plan and make decisions

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8
Q

three types professional accounting organizations in canada

A

Chartered Accountants, Certified Management Accountants, and Certified General Accountants

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9
Q

Chartered Professional Accountant

A

designation used to unify the accounting profession in Canada

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10
Q

chartered accountant

A

person who has the experience and education requirements (university degree and an educational program) and has passed a licensing examination

  • acts as an outside accountant for other firms or for individuals
  • typically provide audit, tax, and management services
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11
Q

certified general accountant

A

individual who has completed an education program and passed a national exam

  • works in private industry or a CGA firm
  • focus on external financial reporting
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12
Q

certified management accountant

A

designation given by the society of management accountants of canada

  • individual must complete a university degree, pass a two-part national exam, and complete a strategic leadership program
  • focus on strategic management and resource deployment and planning overall strategy for the firm
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13
Q

audit

A

accountant/s examination of a company’s financial records to determine if it used proper procedure to prepare its financial reports

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14
Q

generally accepted accounting principles (gaap)

A

standard rules and methods used by accountants in preparing financial reports

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15
Q

International Financial Reporting Standards (ifrs)

A

global gaap created by International Accounting Standards Boards

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16
Q

forensic accountant

A

accountants who track down hidden fnds in business firms

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17
Q

management consulting services

A
  • range from personal financial planning to corporate financial planning
  • specialized accounting services to help managers resolve problems in finance, production scheduling, etc
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18
Q

accounting cycle

A
  • analyze transaction documents
  • record transactions to journal
  • transfer entries from journal to a ledger
  • do a trial balance
  • prepare financial statements
  • analyze financial statements
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19
Q

private accountant

A

accountant hired as a salaried employee to deal with company’s day-to-day accounting needs

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20
Q

accounting equation

A

assets = liabilities + owners’ equity

- formula used by accountants to balance data for firm’s financial transactions

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21
Q

asset

A

anything of economic value owned by a firm or individual

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22
Q

liability

A

any debt owed by a firm or individual to others

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23
Q

owners’ equity

A

any positive difference btwn a firm’s assets and its liabilities (what would remain for a firm’s owners if the company were liquidated, all assets sold, and all its debts were paid)

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24
Q

double-entry accounting systems

A

bookkeeping system that requires every transaction to be entered in two ways – how it affects assets and how it affects liabilities and owners’ equity – so that the accounting equation is always in balance

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25
Q

financial statements

A

any of several types of broad reports regarding a company’s financial status (ex. balance sheets, income statements, and/or statements of cash flow)

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26
Q

balance sheet

A

type of financial statement that summarizes a firm’s financial position on a particular date in terms of its assets, liabilities, and owners’ equity

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27
Q

three types of assets

A

current, fixed, and intangible

28
Q

current assets

A

cash and other assets that can be converted to cash within a year (ex cash, merchandise inventory, prepaid expenses)

29
Q

liquidity

A

the ease and speed with which an asset can be converted to cash (cash is perfectly liquid)

30
Q

non-liquid assets

A

accounts receivable, merchandise inventory, and prepaid expenses

31
Q

accounts receivable

A

amounts due to the firm from customers who have purchased goods or services on credit

32
Q

merchandise inventory

A

cost of merchandise that has been acquired for sale to customers but it still on hand

33
Q

prepaid expenses

A

supplies on hand and rent paid for the period to come

34
Q

fixed assets

A

assets that have long-term use or value to the firm (ex land, buildings, machinery)

35
Q

depreciation

A

distributing the cost of a major asset over the years in which it produces revenues – calculated each year by subtracting the asset’s original value divided by the number of years in its productive life

36
Q

intangible assets

A

non-physical assets that have economic value but whose precise value is difficult to calculate (such as patents, trademarks, copyrights, franchise fees)

37
Q

goodwill

A

amount paid for an existing business beyond the value of its other assets

38
Q

current liabilities

A

debts that must be paid within one year (include accounts payable)

39
Q

accounts payable

A

amounts due from the firm to its suppliers for goods and/or services purchased on credit

40
Q

long-term liabilities

A

debts that are not due for at least one year (normally borrowed funds on which company must pay interest)

41
Q

paid-in capital

A

additional money invested in firm by the owners (owners’ equity)

42
Q

three parts of owners’ equity

A

common stock, paid-in capital, and retained earnings

43
Q

retained earnings

A

company’s net profits less any dividend payments to shareholders

44
Q

income statement (profit-and-loss statement)

A

type of financial statement that describes a firm’s revenues and expenses and indicates whether the firm has earned a profit or suffered a loss during a given period

45
Q

revenue

A

money received by a firm as a result of selling a good or service or from other sources such as interest, rent, and licensing fees

46
Q

revenue recognition

A

formal recording and reporting of revenues in financial statements

47
Q

matching principle

A

expenses should be matched with revenues to determine net income for an accounting period

48
Q

cost of goods sold

A

expenses directly involved in the producing or selling of a good or service during a given time

49
Q

gross profit (gross margin)

A

firm’s revenues minus its cost of goods sold

50
Q

operating expenses

A

costs incurred by a firm other than those included in cost of goods sold (ex. salaries, insurance, maintenance costs, etc)

51
Q

operating income

A

compares gross profit from business operations against operating expenses

52
Q

net income (net profit)

A

firm’s gross profit minus operating expenses and income taxes

53
Q

statement of cash flow

A

financial statement that describes a firm’s generation and use of cash during a given period

  • shows the effects on cash from 3 types of business activity:
    • cash flow from operations (transactions involved in buying and selling goods/services)
    • cash flow from investing (cash used in or provided by investing or buying/selling property and equipment)
    • cash flow from financing (reports net cash from all financing activities – borrowing or issuing stock, as well as outflows for payment of dividends and repayment of borrowed money)
54
Q

budget

A

detailed financial plan for estimated receipts and expenses for a period of time in the future, usually one year

55
Q

solvency ratios

A

ratios that estimate the financial risk in a company

56
Q

short-term solvency ratios

A

financial ratio for measuring a company’s ability to pay immediate debts

57
Q

current ratio

A

financial ratio for measuring company’s ability to pay current debts out of current assets (current assets divided by current liabilities)

58
Q

long-term solvency

A

calculated by dividing debt (total liabilities) by owners; equity

59
Q

debt-to-equity ratio

A

form of debt ratio calculated as total liabilities divided by owners’ equity

60
Q

leverage

A

using borrowed funds to make purchases, thus increasing the user’s purchasing power, potential rate of return, and risk of loss

61
Q

profitability ratio

A

measure of a firm’s overall financial performance in terms of its likely profits

62
Q

return on equity

A

form of profitability ratio calculated as net income divided by total owners’ equity (net income earned for each dollar invested)

63
Q

return on sales

A

ratio calculated by dividing net income by sales revenue (how much profit for each dollar of sales revenue)

64
Q

earnings per share

A

form of profitability ratio calculated as net income divided by the number of common shares outstanding

65
Q

activity ratio

A

measure of how efficiently a firm uses its resources

66
Q

inventory turnover ratio

A

activity ratio that measures the average number of times inventory is sold and restocked during the year

Business Administration (14 decks)

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