Chapter 14 Flashcards

1
Q

The __________ banner (designation) is being used to unify the Canadian Accounting Profession.

A

Chartered Professional Accountant (CPA)

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2
Q

What is the primary concern of financial accounting systems?

A

External information users, such as consumer groups and stakeholders

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3
Q

What is determined when gross profits from operations are subtracted from operation expenses?

A

Operating income

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4
Q

What ratio would be most useful in measuring a firm’s potential earnings?

A

Profitability ratio

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5
Q

A(n) ________ is the person who manages all of a firm’s accounting activities by ensuring that the accounting information system provides the reports and statements needed for planning, decision making, and other management activities.

A

controller

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6
Q

Which accounting principle is used to describe income for the year and payments made, acting as one of the most important statements of all?

A

Statement of cash flows

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7
Q

________ is a comprehensive system for collecting, analyzing, and communicating financial information.

A

Accounting

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8
Q

Which financial statement lists a firm’s annual revenues and expenses so that a bottom line shows annual profit or loss?

A

Income statement

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9
Q

What is the purpose of a balance sheet?

A

To provide detailed information about a firm’s assets, liabilities, and owners’ equity

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10
Q

What is the owner’s equity in a firm?

A

The value of assets after all liabilities are paid

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11
Q

Normally represented by borrowed funds, ________ include debts that are not due for at least one year.

A

long-term liabilities

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12
Q

When a firm is for sale, the price might include goodwill based on its reputation in the market or the location of the office. What type of asset is goodwill?

A

Intangible

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13
Q

What is the formal recording and reporting of revenues at the appropriate time?

A

Revenue recognition

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14
Q

What is the purpose of an Accounting Information System?

A

To identify, measure, record, and retain information to use in statements and managerial reports

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15
Q

Not all profits in an organization are spent or distributed. Those profits kept by the firm for future use are _________.

A

retained earnings

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16
Q

A short-term solvency ratio indicates the company’s liquidity and ability to pay immediate debts. What is indicated by a high current ratio?

A

Risk to investors is lower

17
Q

Bills that are unpaid and taxes that will be due within the year are part of _________.

A

accounts payable

18
Q

What is debt?

A

The firm’s total liabilities

19
Q

Historically, the collection and recording of records such as taxes paid, income received, and expenses was called _________ .

A

bookkeeping

20
Q

What does an activity ratio measure?

A

Management’s efficiency in using a firm’s resources

21
Q

A firm’s _______ system is concerned with external information users: consumer groups, unions, stockholders, suppliers, creditors, and government agencies.

A

financial accounting

22
Q

What is revenue?

A

When funds flow into a business when goods or services are sold

23
Q

What does a solvency ratio measure?

A

The borrower’s ability to repay debt

24
Q

Land, buildings, equipment, inventory, and accounts receivable owned by a company are ________.

25
What is the accounting equation?
Assets = Liabilities + Owners’ Equity. | This formula is used by accountants to balance data for the firm’s financial transactions at various points in the year.
26
What is depreciation?
An accounting method for distributing the cost of an asset over its useful life