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intro to business test 3 > chapter 16 > Flashcards

chapter 16 Flashcards

1
Q

what is accounting?

A

the recording, classifying, summarizing & interpreting of financial transactions & events.

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2
Q

what is recording?

A

entries are made into journals

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3
Q

what is classifying?

A

the effects of these journal entries are transferred or posted into ledgers

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4
Q

what are the parts to processing?

A

recording, classifying and summarizing

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5
Q

what are the inputs in the accounting system?

A

accounting documents

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6
Q

what are the outputs of the accounting system?

A

financial statements

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7
Q

what do financial reports pinpoint?

A

problems/opportunities

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8
Q

what do investors, suppliers and creditors do in accounting?

A

provides a means to analyze business

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9
Q

what does the government do in accounting?

A

assist with tax collection

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10
Q

what are the five key working areas in accounting?

A
  1. managerial accounting
  2. financial accounting
  3. compliance (auditing)
  4. tax accounting
  5. governmental & not-for-profit accounting
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11
Q

what is managerial accounting?

A

analyzing financial information to managers for the pursuit of an organization’s goals.

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12
Q

what is managerial accounting concerned with?

A

measuring & reporting costs of production & marketing, & planning & preparing budgets.

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13
Q

what is financial accounting?

A

generates information & analyses for people outside the organization.

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14
Q

in financial accounting where does information go to?

A

owners & prospective owners, creditors & lenders, employee unions, customers, suppliers, government agencies & general public.

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15
Q

what is an annual report?

A

A yearly statement of the financial condition, progress & expectations of an organization.

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16
Q

how do users keep more current?

A

Various quarterly reports (every 3 months)

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17
Q

are these reports required by law?

A

yes for shareholders of public corporations

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18
Q

what are private accountants?

A

work for a single firm, government agency, or non-profit organization.

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19
Q

if companies do not need a full time accountant, who do they hire?

A

they hire independent public accounting firms to maintain their financial records.

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20
Q

what is a public accountant?

A

An accountant who provides services to businesses on a fee basis

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21
Q

what is auditing?

A

Reviewing & evaluating records used to prepare a company’s financial statements

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22
Q

who are audits required for?

A

all public corporations in Canada whose shares are traded in a public stock exchange.

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23
Q

what is compliance?

A

Job of reviewing & evaluating records used to prepare a company’s financial statements

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24
Q

what is the most important function and income generator for public accounting firms?

A

performing independent audits (examinations) of books & financial statements of companies.

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25
what is an independent audit?
an evaluation & unbiased opinion about accuracy of a company’s financial statements.
26
who requires tax returns to be submitted
Federal & provincial governments require submission of tax returns that must be filed at specific times & in a precise format.
27
where is tax accounting trained and what is it resposnsible for?
Tax accountant is trained in tax law & is responsible for preparing tax returns or developing tax strategies (figuring out how to pay less tax)
28
who are the primary users of government accounting?
citizens, special interest groups, legislative bodies & creditors, want to make sure that the gvt is fulfilling its obligations and making proper use of taxpayers money
29
why do not for profit organizations have a growing need for trained accountants?
since contributors to non-profits want to see exactly how & where funds they contribute are being spent.
30
what is a chartered accountant?
ccountant who has met examination, education & experience requirements of Canadian Institute of Chartered Accountants (CICA).
31
what is a certfiieded management accountant?
accountant who has met examination, education & experience requirements of Society of Management Accountants of Canada.
32
what is a certified general accountant?
accountant who has met examination, education & experience requirements of Certified General Accountants Association of Canada.
33
how was the CPA formed?
formed by integration of 3 organizations: CICA, CMA- Canada & CGA-Canada.
34
what is the CPA designation?
an internationally recognized Canadian accounting designation.
35
where does the CPA designation emerge from?
Emerged from belief that Canada needed a single, unified accounting profession to unify Canadian provincial accounting bodies at the national level
36
what are the steps in the accounting cycle?
1. analyze source documents 2. record in journals 3. transfer journals entries into ledger 4. take a trial balance 5. prepare financial statements 6. analyze financial statements
37
how do accountants classify and summarize financial Data?
get it from bookkeepers, interpret the data and report information to management
38
what is a journal?
record book where accounting data are first entered.
39
what is a double entry bookkeeping?
concept of every business transaction affecting at least 2 accounts.
40
what is a ledger?
specialized accounting book in which information from accounting journals is accumulated into accounts & posted so that managers can find all of the information about a specific account in one place
41
what is a trial balance?
A summary of all data in account ledgers to show whether figures are correct & balanced
42
what is a balance sheet?
reports firm’s financial position on a specific date, normally at the end of a period. statement of financial position
43
what is an income statement?
statement of revenues and expenses
44
what is a statement of cash flows?
provides a summary of money coming into & going out of firm during a period. It tracks a company’s cash receipts & cash payments. statement of cash receipts and disbursements
45
what is a financial statement?
summary of all transactions that have occurred over a particular period, they indicate a firm’s financial health & stability & are a key factor in mgmt DM.
46
what is the balance sheet formula?
assets= liabilities plus shareholders equity
47
what are assets?
economic resources (things of value) owned by a firm. can be tangible or intangible
48
how are assets listed on the balance sheet?
according to their liquidity
49
what is liquidity?
refers to how fast an asset is expected to be converted into cash.
50
accounts receivable are considered what?
liquid assets
51
what are current assets?
items that can or will be converted into cash within one year include cash, accounts receivable & inventory (liquid assets).
52
what are capital assets?
items that are relatively permanent goods, (land & buildings) acquired to produce products for a business (fixed assets)
53
what are intangible assets?
LT assets that have no real physical form but do have value (patents, trademarks & copyrights).
54
what are liabilities?
what business owes to others (debts)
55
what are current liabilities?
debts due in 1yr or less
56
what are long term liabilities?
debts not due for 1yr +
57
what are accounts payable?
money owed by a company to its creditors.
58
what are notes payable?
long-term liabilities that indicate the money a company owes its financiers
59
what are bonds payable?
long-term liabilities that represent money lent to firm that must be paid back.
60
what are taxes payable?
taxes & GST collected & income tax payable.
61
what is owners equity?
book value of assets - liabilities of company.
62
what is owners equity in a sole proprierotiship?
owner’s or proprietor’s equity or capital.
63
what is owners equity in a partnership?
owners’ equity = partners’ equity or capital.
64
in a corporation, shareholders equity is made up of?
1. Common stock: amount owners/ SHs invest 2. Retained earnings: accumulated earnings from firms’ profits that remain in business & not paid out to SH
65
what is an income statement?
financial statement that shows a firm’s bottom line—its profit (or loss) after costs, expenses & taxes: known as statement of earnings.
66
what is revenue?
value of what is received for goods sold, services rendered & financial sources.
67
what is the difference between revenue and sales?
most revenue comes from sales, but there could be other sources of revenue, like rents received.
68
what is cost of goods sold/manufactured?
measure of cost of merchandise sold or cost of raw materials & supplies used for producing items for resale
69
what is gross profit? (gross margin)
net sales minus cost of goods sold
70
what are operating expenses?
costs involved in operating a business, include rent, salaries, supplies, utilities, insurance, research & even amortization of equipment
71
what is depreciation?
a decrease in the value of something over time.
72
what is net profit or loss?
Revenues - Expenses
73
what is a cash flow statement?
Reports cash receipts & disbursements related to 3 major firm activities: operations, investing & financing. Offers firm insight into how to handle cash better so that no cash flow problems occur
74
what are operations in a cash flow statement?
cash transactions associated with running the business
75
what is investing in a cash flow statement?
cash used in or provided by firm’s investing activities (normally including capital assets)
76
what is financing in a cash flow statement?
cash raised from new debt, cash used to pay expenses, past debts or co. dividends
77
what is cash flow?
difference bet cash coming in & cash going out of a business.
78
what can happen if cash flow is not properly managed?
can cause a business much concern, common mistake among start-ups
79
what is a ratio analysis?
looking at a firm’s financial condition & performance through calculations & interpretation of financial ratios
80
what are financial ratios useful in?
in analyzing company’s actual performance compared to its past performance, current financial objectives & other firms within its industry
81
what is market liquidity?
how quickly an investment can be sold (without impacting price)
82
what is financial liquidity?
ability to meet financial obligations
83
what is a liquidity ratio?
measure a company’s ability to turn some assets into cash to pay its short-term debts
84
what is a current ratio (liquidity ratio).
ratio of a firm’s current assets to its current liabilities.
85
what is an acid test or quick ratio (liquidity ratio)?
measures cash, marketable securities (like stocks & bonds), & receivables of a firm, compared to its current liabilities
86
what is the formula for current ratio?
current assets/current liabilities
87
what is the formula for quick ratio?
liquid assets/current liabilities
88
what is a leverage (debt) ratio?
measures degree to which a firm relies on borrowed funds in its operations.
89
what is a profitability (performance) ratio?
measure how effectively a firm’s managers are using its various resources to achieve profits.
90
what are three important ratios (performance)
- earnings per share (EPS), – return on sales, – & return on equity.
91
what is an activity ratio?
tell us how effectively management is turning over inventory.
92
what is an inventory turnover ratio?
measures speed with which inventory moves through a firm & gets converted into sales. Idle inventory sitting in a warehouse earns nothing & costs money

intro to business test 3 (3 decks)

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