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ADM 1100 EXAM > Chapter 11 > Flashcards

Chapter 11 Flashcards

1
Q

Accounting

A

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

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4
Q

What do business managers use accounting for?

A

To set goals, develop plans, set budgets, and evaluate future prospects.

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5
Q

What do employees and unions use accounting for?

A

To get paid and to plan for and receive benefits such as health care, insurance, vacation time, and retirement pay.

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6
Q

What do Investors and creditors use accounting for?

A

To estimate returns to shareholders and to determine a company’s growth prospects and whether it is a good credit risk before investing or lending.

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7
Q

What do tax authorities use accounting for

A

To plan for tax inflows, determine the tax liabilities of individuals and businesses, and ensure that correct amounts are paid on time.

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8
Q

What do government regulatory agencies use accounting for?

A

Rely on accounting information to fulfil their duties.

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9
Q

Financial Accounting

A

Keeps external parties informed about the firm’s financial condition

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10
Q

Managerial Accounting

A

Directed at internal parties (managers) or Provides information to facilitate planning, forecasting, and decision-making within the firm

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11
Q

Chartered Accountants (CA)

A

An individual who has met certain experiences and education requirements and has passed a licensing examination; acts as an outside accountant for other firms

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12
Q

Certified General Accountants (CGA)

A

An individual who has completed an education program and passed a national exam; works in privately industry or a CGA firm

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13
Q

Certified Management Accountants (CMA)

A

An individual who has completed a university degree, passed a national examination, and completed a strategic leadership program; works in industry and focuses on internal management accounting

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14
Q

What are CAs, CGAs, and CMAs all classified as now?

A

CPAs

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15
Q

Private accountants

A

Hired as salaried employees; Duties cover day-to-day accounting needs. Small business may have just one and Large business may have area specialists (i.e. budgeting, taxation, accounts payable etc.)

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16
Q

The Accounting Cycle

A
  1. Analyze transaction documents
  2. Records transactions in a journal
  3. Transfer entries from the journal to a ledger
  4. Do a trial balance
  5. Prepare financial statements
  6. Analyze the financial statements
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17
Q

International Accounting Standards Board (IASB)

A

Members in over 80 countries; Goal is to eliminate differences in financial reporting from country to country; IASB statements include an income statement, balance sheet and a statement of cash flows

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18
Q

International Financial Reporting Standards (IFRS)

A

Used by publicly accountable enterprises and private government enterprises

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19
Q

Accounting Standard For Private Enterprises (ASPE)

A

Standard accounting rules that can be used by private businesses in Canada in preparing financial reports

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20
Q

Asset

A

Anything of economic value owned
by a firm or individual (Liabilities + Owners’ Equity)

21
Q

Liability

A

Any debt owed by a firm or an
individual

22
Q

Owners’ Equity

A

Any positive difference between a firm’s assets and liabilities

23
Q

Double-Entry Bookkeeping System

A

All transactions are entered in two ways, showing how they impact assets and liabilities. The accounting equation is always kept in balance

24
Q

Balance Sheets

A

Provide detailed information about the accounting equation factors (assets, liabilities, owner’s equity). Show a firm’s financial condition at one point in time

25
Q

Accounts receivable

A

Amounts owed to the firm by customers

26
Q

Inventory

A

Cost of merchandise acquired for sale but not yet sold

27
Q

Prepaid expenses

A

Supplies on hand and rent (other bills) paid for coming period

28
Q

Fixed Assets

A

Have a long-term use or value (Land, Buildings, and Machinery)

29
Q

Depreciation

A

Distributing the cost of a major asset over its lifetime, deducted yearly

30
Q

Finance involves four key responsibilities

A

Determine a firm’s long-term investments, Obtain funds to pay for those investments, Conduct the firm’s everyday financial activities, and Help manage the risks that a firm takes

31
Q

Intangible Assets

A

Non-physical assets with economic value (difficult to calculate) - Patents, Trademarks, Franchise fees, and Copyrights

32
Q

Goodwill

A

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

33
Q

Current liabilities

A

Debts owed by the firm that must be repaid within one year (i.e., accounts payable)

34
Q

Long-term liabilities

A

Debts owed by the firm and due in more than one year

35
Q

Owners’ equity

A

Owners’ holdings in the firm

36
Q

Income Statement

A

Sometimes called a profit-and-loss statement; Description of revenues and expenses that shows the firm’s annual profit or loss (revenues – expenses = profit (or loss))

37
Q

Cash flow from operations

A

Cash flows from buying and selling of goods and services

38
Q

Revenue Recognition

A

The formal recording and reporting of revenues in financial statements once the earnings cycle is completed

39
Q

Matching

A

Expenses will be matched with revenues to show net income for an accounting period

40
Q

Budget

A

A detailed financial plan of estimated receipts and expenditures for a future period (An internal financial statement (usually 1 year), Requires input from other departments, Compares actual vs. budget to signal problems)

41
Q

Solvency Ratios

A

Short term and long term, estimate of risk

42
Q

Profitability Ratios

A

Measure potential earnings

43
Q

Activity Ratios

A

Reflect management’s use of assets

44
Q

Short Term Solvency ratios

A

Current ratio (current assets/current liabilities)

45
Q

Long Term Solvency Ratios

A

Debt to equity ratio (debt/owner’s equity); Leverage

46
Q

Return on Equity (profitability ratio)

A

Net income/total owner’s equity

47
Q

Return on Sales (profitability ratio)

A

Net income/sales revenue

48
Q

Earnings per Share (profitability ratio)

A

Net income/number of common shares
outstanding

49
Q

Inventory turnover ratio (activity ratio)

A

Cost of goods sold/average inventory; Measures the average number of times inventory is sold and restocked during the year

ADM 1100 EXAM (5 decks)

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