Chapter 16: Understanding Accounting And Finanical Information

Question 1

Accounting

Answer 1

The recording, classifying, and interpreting of financial events and transactions to provide management the information they need to make good decisions

Question 2

Accounting professions working areas (5)

Answer 2

Managerial accounting 
Financial accounting 
Auditing 
Tax accounting 
Government and not-for-profit accounting

Question 3

Managerial accounting

Answer 3

Accounting used to provide information and analyses to managers inside the organization to assist them in deification making

Question 4

Financial accounting

Answer 4

Accounting information and analyses prepared for people outside the organization

Question 5

Annual report

Answer 5

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

Question 6

Private accountant

Answer 6

An accountant who works for a single firm, governor agency, or not for profit organization

Question 7

Public accountant

Answer 7

An accountant who provides his or her accounting services to individuals or businesses on a few basis

Question 8

International financial reporting standards (IFRS)

Answer 8

The common set of accounting principles, standards, and procedures that accountants use to compile financial statements

Question 9

Auditing

Answer 9

The job or reviewing and evaluating the records used to prepare a company’s financial statement

Question 10

Independent audit

Answer 10

An evaluation and unbiased opinion about the accuracy of a company’s financial statement

Question 11

Forensic accounting

Answer 11

Relatively new area of accounting that focuses its attention on fraudulent activity

Question 12

Tax accountant

Answer 12

An accountant trained in tax law and responsible for preparing tax returns or developing tax strategies

Question 13

Government and not for profit accounting

Answer 13

Accounting system for organizations whose purpose is not generating a profit but rather serving ratepayers, taxpayers, and others according to a duly approved budget

Question 14

Canada has 3 legacy professional accounting designations. What are they?

Answer 14

Chartered accountant
Certified management accountant
Certified general accountant

Question 15

Chartered professional accountant designation

Answer 15

The internationally recognized Canadian accounting designation

Question 16

Accounting cycle

Answer 16

Six step procedure that results in the preparation and analysis of the major financial statements

Question 17

Bookkeeping

Answer 17

Recording of business transactions

Question 18

Journal

Answer 18

Record book where accounting data are first entered

Question 19

Double entry bookkeeping

Answer 19

Have records in two known spots

Spanny with math marks

Question 20

Ledger

Answer 20

Specialized accounting book in which information from accounting journals is accumulated into accounts and posted so the managers can find all of the information about a specific account in one place

Question 21

Trial balence

Answer 21

Summary of all the data in the account ledger to show whether the figures are correct and balenced

Question 22

Financial statement

Answer 22

Summary of all of the transactions that have occurred over a particular period

Question 23

3 key business statements

Answer 23

Balence sheet
Income statement
Statements of cash flow

Question 24

Fundemental accounting equation

Answer 24

Assets = liabilities + owners equity

This is the basis for all balence sheets

Question 25

Accounts

Answer 25

Different types of assets, liabilities, and owners equity

Question 26

Balance sheet (AKA financial position)

Answer 26

The financial statement that reports a firms financial condition at a specific time and is composed of three major types of accounts: Assets, liabilities, and owners equity

Question 27

Assets

Answer 27

Economic resources (things of value) owned by a firm | Equipment, buildings, land

Question 28

Liquidity

Answer 28

The ease with which an asset can be converted into cash

Question 29

3 types of assets

Answer 29

Current assets Fixed assets Intangible assets

Question 30

Current assets

Answer 30

Items that can or will be converted into cash within one year

Question 31

Fixed assets

Answer 31

Assets that are relatively permanent, such as land, building, and equipment

Question 32

Liabilities

Answer 32

What the business owes to others (debts)

Question 33

Common liability accounts (3)

Answer 33

Accounts payable Notes payable Bonds payable

Question 34

Accounts payable

Answer 34

Current liabilities or bills a company owes others for merchandise or services purchased on credit but not yet paid for

Question 35

Notes payable

Answer 35

Short term or long term liabilities that a business promises to repay by a certain date

Question 36

Bonds payable

Answer 36

Long term liabilities that represent money lent to a firm that must be paid back

Question 37

Owners equity

Answer 37

The amount of the business that belongs to the owners minus any liabilities owed by the business

Question 38

Retained earnings

Answer 38

Accumulated earnings form a firms profitable operations that remain in the business and age not paid out to shareholders as dividends

Question 39

Income statement (statement of earnings)

Answer 39

The financial statement that shows a firms profit after cost, expenses, and taxes

Question 40

Net income / net loss

Answer 40

Revenue left over after all costs and expenses, including taxes, are paid

Question 41

Cost of goods sold (cost of goods manufactured)

Answer 41

Measure of the cost of merchandise sold or cost or raw material and suppliers used for producing items for resale

Question 42

Gross profit (gross margin)

Answer 42

How much a firm earned by buying (or making) and selling merchandise

Question 43

Operating expenses

Answer 43

Costs involved in operating a business, such as rent, utilities, and salaries

Question 44

Depreciation

Answer 44

The systematic write off of the cost of a tangible asset over its estimated useful life

Question 45

Statements of cash flow (cash flow statements)

Answer 45

Financial statement that reports cash receipts and cash disbursements related to a firms three major activities (operations, investing, and financing

Question 46

Cash flow

Answer 46

The difference between cash coming in and going out of a business

Question 47

Ratio analyses

Answer 47

The assessment of a firms financial condition using calculations and interpretations of financial ratios developed from the firms financial statements

Question 48

Liquidity ratio

Answer 48

Measure a company’s ability to turn assets in cash to pay short term debts

Question 49

5 main areas of accounting

Answer 49

``` GO FIN(D) A TAX MAN Government, financial, auditing, tax, managerial ```

Question 50

Accounting equation (and describe it with 100$)

Answer 50

Assets = liabilities + owners equity Assets is the total money you have. Liabilities is the 40$ your friend gave you (that you need to pay back one day) and owners equity is the money you started with, so the $60 in your wallet