Chapter 14 Flashcards
The __________ banner (designation) is being used to unify the Canadian Accounting Profession.
Chartered Professional Accountant (CPA)
What is the primary concern of financial accounting systems?
External information users, such as consumer groups and stakeholders
What is determined when gross profits from operations are subtracted from operation expenses?
Operating income
What ratio would be most useful in measuring a firm’s potential earnings?
Profitability ratio
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.
controller
Which accounting principle is used to describe income for the year and payments made, acting as one of the most important statements of all?
Statement of cash flows
________ is a comprehensive system for collecting, analyzing, and communicating financial information.
Accounting
Which financial statement lists a firm’s annual revenues and expenses so that a bottom line shows annual profit or loss?
Income statement
What is the purpose of a balance sheet?
To provide detailed information about a firm’s assets, liabilities, and owners’ equity
What is the owner’s equity in a firm?
The value of assets after all liabilities are paid
Normally represented by borrowed funds, ________ include debts that are not due for at least one year.
long-term liabilities
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?
Intangible
What is the formal recording and reporting of revenues at the appropriate time?
Revenue recognition
What is the purpose of an Accounting Information System?
To identify, measure, record, and retain information to use in statements and managerial reports
Not all profits in an organization are spent or distributed. Those profits kept by the firm for future use are _________.
retained earnings
A short-term solvency ratio indicates the company’s liquidity and ability to pay immediate debts. What is indicated by a high current ratio?
Risk to investors is lower
Bills that are unpaid and taxes that will be due within the year are part of _________.
accounts payable
What is debt?
The firm’s total liabilities
Historically, the collection and recording of records such as taxes paid, income received, and expenses was called _________ .
bookkeeping
What does an activity ratio measure?
Management’s efficiency in using a firm’s resources
A firm’s _______ system is concerned with external information users: consumer groups, unions, stockholders, suppliers, creditors, and government agencies.
financial accounting
What is revenue?
When funds flow into a business when goods or services are sold
What does a solvency ratio measure?
The borrower’s ability to repay debt
Land, buildings, equipment, inventory, and accounts receivable owned by a company are ________.
assets
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.
What is depreciation?
An accounting method for distributing the cost of an asset over its useful life
