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Business Fundamentals > Chapter 11 > Flashcards

Chapter 11 Flashcards

1
Q

Define accounting

A

comprehensive system for collecting, analyzing, and communicating financial information

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2
Q

Define bookkeeping

A

recording accounting transactions

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3
Q

Define accounting info system (AIS)

A

organized procedure for identifying, measuring, recording, and retaining financial information

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4
Q

Who are the users of accounting info

A

Business managers
Employees and unions
Investors and creditors
Taxing authorities
Government regulatory agencies

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5
Q

Define “controller” in AIS

A

ensures that the accounting system provides the reports and statements needed for planning, controlling and decision-making; activities may need different types of accounting specialists

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6
Q

Define financial accounting

A

keeps external parties informed about the firm’s financial condition

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7
Q

Define managerial accounting

A

directed at internal parties (managers); provides information to facilitate planning, forecasting, and decision-making

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8
Q

What are the levels of professional accountants + the unified

A

Chartered (CA)
Certified general (CGA)
Certified management (CMA)
Unified to Chartered professional (CPA)

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9
Q

What accounting services exist

A

Auditing
Tax services
Management consulting services

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10
Q

Define auditing in accounting

A

Examination of financial records to ensure fair rep. (GAAP)

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11
Q

Define tax services in accounting

A

Tax return prep and tax planning

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12
Q

Define management consulting services in accounting

A

Personal financial planning to business planning

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13
Q

Define private accountants

A

Hired as salaried employees
Duties cover daily accounting needs
Small business will have just one
Larger business will have specialists (budgeting, taxation, accounts payable, etc)

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14
Q

What are the 6 steps to the accounting cycle

A
  1. Analyze transaction documents
  2. Record transactions in journal
  3. Transfer journal entries to ledger
  4. Trial balance
  5. Prep financial statements
  6. Analyze financial statements
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15
Q

Define the International Accounting Standards Board (IASB)

A

Members in 80+ countries
Goal to eliminate differences in financial reporting globally
Statements include: income statement, balance sheet, statement of cash flow

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16
Q

Define International Financial Reporting Standards (IFRS)

A

Standard accounting rules dev. by IASB
Used by publicly accountable/privately government enterprises

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17
Q

Define Accounting Standard for Private Enterprises (ASPE)

A

Standard accounting rules can be used by private businesses in Canada to prepare financial reports

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18
Q

Define an asset

A

Anything of economic value owner by firm/indiv

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19
Q

Define a liability

A

Any debt owed by firm/indiv

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20
Q

Define owners’ equity

A

Any positive difference between firm’s assets and liabilities

21
Q

Define the double-entry bookkeeping system

A

Transactions entered two ways showing how impact assets AND liabilities; accounting equation always kept in balance

22
Q

What is the accounting equation

A

Assets = liabilities + owners equity

23
Q

What are the 3 important financial statements + their purpose together

A

Balance sheets
Income statements
Statements of cash flow
Reflect activity/financial conditions of company

24
Q

Define balance sheets

A

Provide detailed information about accounting equation factors; show firm’s financial condition at a point in time

25
Q

What makes up a current asset

A

Cash
Assets capable of being converted into cash within a year
Accounts receivable (amount customers owe firm)
Inventory (cost of merchandise not yet sold but ready for sale)
Prepaid expenses (supplies onhand + bills paid for in advance)

26
Q

Define fixed assets + what makes it up

A

Long-term use/value
Land
Buildings
Machinery

27
Q

How to calculate fixed assets depreciation

A

Distribute cost of major asset over lifetime, deduct yearly

28
Q

Define intangible assets + ex

A

Non physical assets with economic value but difficult to calculate
Patents
Trademarks
Franchise fees
Copyright

29
Q

Define goodwill

A

Amount paid for existing business beyond value of other assets

30
Q

Define current liabilities

A

Debts owed by firm that must be repaid within one year (ie accounts payable)

31
Q

Define long term liabilities

A

Debts owed by firm due in over a year

32
Q

Define owners’ equity

A

Owners’ holdings in firm

33
Q

What makes up a balance sheet

A

Assets, liabilities, owners equity

34
Q

Define an income statement

A

Describes revenues, expenses showing firm’s annual profit/loss (AKA profit-and-loss statement)

35
Q

What is the profit equation

A

Revenues - expenses

36
Q

What is included on an income statement

A

Net sales
Cost of goods sold
Gross profit
Operation expenses
Income

37
Q

What is included in the statement of cash flows

A

Operations (g/s)
Investments
Financing

38
Q

Define revenue recognition

A

Formal recording, reporting of revenues in financial statements once earnings cycle is completed

39
Q

Define matching

A

Expenses match with revenue to show net income for accounting period

40
Q

Define a budget

A

Detailed financial plan of estimated receipts/expenditures for future period

41
Q

What does a budget requier

A

Internal financial statement of approx. 1 year
Input from multiple departments
Comparison of actual to signal problems

42
Q

What are the 3 types of ratios that analyze financial statements

A

Solvency
Profitability
Activity

43
Q

Define two types of solvency ratios

A

Short term: Current assets/current liabilities
Long term: debt to equity (debt/owner equity)

44
Q

Define profitability ratios

A

Return on equity: net income/total OE
Return on sales: net income/sales rev
Earnings per share: net income/# of common shares outstanding

45
Q

Define activity ratios

A

Inventory turnover ratio (cost of goods sold/avg inventory); measures avg # of times inventory is sold and restocked during the year

46
Q

Are ethics important in accounting

A

Yes because they help maintain public’s confidence in institutions, financial markets, accounting professionW

47
Q

What happens if there are no ethics in accounting

A

Accounting tools would be meaningless

48
Q

What are competencies accountants should posses

A

Strategic thinking
Problem solving
Communications
Leadership
Dedication to meeting customer needs
Tech profficient

Business Fundamentals (15 decks)

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