chap 17

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

Question 2

accounting system

Answer 2

the inputs include sales documents, the data is recorded, classified, and summarized. then put into a financial statement like the income statement and balance sheet and the statement of cash flows

Question 3

the purpose of accounting is to…

Answer 3

help managers make well-informed decisions and report financial information about the firm to interested stakeholders like employees, owners, creditors, suppliers, unions, community activities, investors, and the government.

Question 4

accounting cycle

Answer 4

a six step procedure that results in the preparation and analysis of the major financial statements. it relies on the accountant and bookkeeper

Question 5

accountants…

Answer 5

classify and summarize financial data provided by bookkeepers, then interpret the data and report the information to management

Question 6

bookkeeping

Answer 6

the recording of business transactions

Question 7

Bookkeeper tasks include…

Answer 7

divide all the firms transactions into meaningful categories, record financial data from the original transaction documents into a record book or computer program called a journal

Question 8

journal

Answer 8

the record book or computer program where accounting data os the first entered

Question 9

double entry bookkeeping

Answer 9

the practice of writing every business transaction in two places to make sure both add up to the same amount

Question 10

ledger

Answer 10

they transfer information from journals into specific categories so managers can find all the information about a single account, like office supplies or cash in one place

Question 11

trial balance

Answer 11

a summary of all financial data in the account ledgers that ensures the figures are correct and balanced

Question 12

financial statement

Answer 12

a summary of all the financial transactions that have occurred over a particular period. (they indicate a firms financial health and stability

Question 13

the key financial statements

Answer 13

the balance sheet, income statement, and the statement of cash flows

Question 14

balance sheet

Answer 14

reports the firms financial condition on a specific date

Question 15

income statement

Answer 15

summarizes revenues, cost of goods sold, and expenses for a specific period and highlights the total profit or loss the firm experienced during that period

Question 16

statement of cash flows

Answer 16

A summary of money coming into and going out of the firm. (tracks cash receipts and cash payments)

Question 17

Fundimental Accounting Equation

Answer 17

your assets are equal to what you own, if you borrow money your assets are equal to what you owe plus what you own.
Assets=Liabilities+Owners’ equity

Question 18

liquidity

Answer 18

the ease with which an asset can be converted into cash

Question 19

account receivable

Answer 19

the amount of money owed to the firm that it expect to receive within one year

Question 20

current assets

Answer 20

items that can or will be converted into cash within one year
(cash, account receivable, and inventory)

Question 21

fixed assets

Answer 21

long-term assets that are relatively permanent. (land, building equipment)

Question 22

intangible assets

Answer 22

long-term assets that have no physical form but do have value. (patents, trademarks, copyrights)

Question 23

cash flow

Answer 23

the difference between the cash coming in and cash going out of a business (shows that a business’s relationship with its lenders is critical to preventing cash flow problems)

Question 24

current liabilities

Answer 24

payments that are due in one year or less

Question 25

long-term liabilities

Answer 25

payments that are not due for one year or longer

Question 26

owners equity

Answer 26

the value of what stockholders own in a firm

Question 27

accounts payable

Answer 27

are current liabilities or bills the company owes others for merchandise or service it purchased on credit and not yet paid for.

Question 28

notes payable

Answer 28

can be short-term or long-term liabilities the business promises to pay by a certain date

Question 29

bonds payable

Answer 29

long term liabilities ( money lent to the firm by bondholders and must pay back)

Question 30

retained earnings

Answer 30

the accumulated earnings from form profitable operations that were reinvested in the business and not paid out to stockholders in dividends

Question 32

revenue

Answer 32

the monetary value of what a firm received for goods sold, services rendered, and other payments.

Question 33

ratio analysis

Answer 33

shows the firm’s financial condition using calculations and financial ratios from the firm’s financial statements.

Question 34

liquidity ratios

Answer 34

measure a company’s ability to turn assets into cash to pay its short-term debts

Question 35

current ratio

Answer 35

the ratio of a firm’s current assets to its current liabilities.

current ratio=current assets/current liabilities

Question 36

acid-test (quick ratio)

Answer 36

measures the cash, marketable securities, and receivables of a firm compared to its current liabilities

Question 37

leverage (debt) ratio

Answer 37

measures the degree to which a firm relies on borrowed funds in its operations

Question 38

profitability (performance) ratios

Answer 38

measures how effectively a firm’s managers are using its various resources to achieve profits

Question 39

activity ratios

Answer 39

tell us how effectively management is turning over inventory

Question 40

five accounting working areas

Answer 40

financial accounting, managerial accounting, auditing, tax accounting, and governmental and non-profit accounting

Question 41

financial accounting

Answer 41

gives financial information and analyses it for people outside the organzation

Question 42

annual report

Answer 42

a yearly statement of the financial condition, progress, and expectation of an organization

Question 43

CPAs

Answer 43

find careers as public or private accountants and are often sought to fill other financial positions within an organization

Question 44

managerial accounting

Answer 44

provides information and analysis to managers inside the organization to assist them in decision-making. (measuring and reporting cost of production, marketing, preparing budgets,(planning and controlling))

Question 45

auditing

Answer 45

reviewing and evaluating the information used to prepare a companies financial statements

Question 46

tax accountant

Answer 46

is trained in tax law and is responsible for preparing tax returns, or developing tax strategies. (this job becomes increasingly challenging and valuable)

Question 47

government and non-profit accounting

Answer 47

supports organizations that do not want to generate profit, but serve ratepayers, taxpayers etc

Question 48

independent audit

Answer 48

an evaluation and unbiased opinion about the accuracy of a company’s financial statement

Question 49

six step accounting cycle

Answer 49

1)analysing document
2)record info in journals
3)post info into ledgers
4)developing a trial balance
5)preparing the balance sheet
6)analyzing financial statements

Question 50

how do computors help accountants

Answer 50

they can record and analyze data and provide financial reports. they can not themselves make good financial decisions

Question 51

major accounts of the balance sheet

Answer 51

owners equity, assets, and liabilities

Question 52

four key categories of ratios

Answer 52

liquidity ratio, leverage ratio, profitability ratio, and activity ratio

Question 53

ledgers

Answer 53

are specialized accounting books that arrange the transactions by homogeneous groups (accounts).