Chapter 17

Question 1

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

Answer 1

Accounting

Question 2

What are the three parts to an accounting system

Answer 2

Inputs
Processing
Outputs

Question 3

A six-step procedure that results in the preparation and analysis of the major financial statements.

Answer 3

Accounting Cycle

Question 4

The recording of business transactions.

Answer 4

Bookkeeping

Question 5

how do accountants and bookkeepers work together

Answer 5

Accountants clarify and summarize financial data provided by bookkeepers

Question 6

What are the six steps to the accounting cycle

Answer 6

Analyze source documents
Record transactions to journal
Transfer journal entries to ledger
Take trial balance
Prepare financial statements
Analyze statements

Question 7

The record book or computer program where accounting data is first entered

Answer 7

Journal

Question 8

The practice of writing every business transaction in two places.

Answer 8

Double-entry bookkeeping

Question 9

A specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place.

Answer 9

Ledger

Question 10

A summary of all the financial data in the account ledgers that ensures the figures are correct and balanced.

Answer 10

Trial Balance

Question 11

A summary of all the transactions that have occurred over a particular period.

Answer 11

Financial Statement

Question 12

What are the three key financial statements

Answer 12

Balance Sheet
Income sheet
Statement of cashflow

Question 13

Assets = Liabilities + Owners’ equity; this is the basis for the balance sheet.

Answer 13

Fundamental accounting equation

Question 14

Financial statement that reports a firm’s financial condition at a specific time and is composed of three major accounts: assets, liabilities, and owners’ equity.

Answer 14

Balance Sheet

Question 15

Economic resources (things of value) owned by a firm.

Answer 15

Assets

Question 16

The ease with which an asset can be converted into cash.

Answer 16

Liquidity

Question 17

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

Answer 17

Current Assets

Question 18

Assets that are relatively permanent, such as land, buildings, and equipment.

Answer 18

Fixed Assests

Question 19

Long-term assets (e.g., patents, trademarks, copyrights) that have no real physical form but do have value.

Answer 19

Intangible Assets

Question 20

What the business owes to others (debts).

Answer 20

Liabilities:
Current debts are do in 1 year or less
Long term are not do for 1 or more years

Question 21

Current liabilities involving money owed to others for merchandise or services purchased on credit but not yet paid for.

Answer 21

Accounts payable

Question 22

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

Answer 22

Notes Payable

Question 23

Long-term liabilities that represent money lent to the firm that must be paid back.

Answer 23

Bonds payable

Question 24

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

Answer 24

Owners equity

Question 25

The accumulated earnings from a firm’s profitable operations that were reinvested in the business and not paid out to stockholders in dividends.

Answer 25

Retained earnings

Question 26

The financial statement that shows a firm’s profit after costs, expenses, and taxes; it summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm, expenses, and the resulting net income or net loss.

Answer 26

Income Statement

Question 27

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

Answer 27

Net income or net loss

Question 28

A measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale.

Answer 28

Cost of Goods Sold

Question 29

The monetary value of what a firm received for goods sold, services rendered, and other payments

Answer 29

Revenue

Question 30

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

Answer 30

Gross profit or gross margin

Question 31

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

Answer 31

Operating expenses

Question 32

Financial statement that reports cash receipts and disbursements related to a firm’s three major activities: operations, investments, and financing.

Answer 32

Statement of cash flows

Question 33

The assessment of a firm’s financial condition using calculations and interpretations of financial ratios developed from the firm’s financial statements.

Answer 33

Ratio Analysis

Question 34

Ratios that measure a company’s ability to turn assets into cash to pay its short-term debts

Answer 34

Liquidity ratios

Question 35

Ratios that measure the degree to which a firm relies on borrowed funds in its operations.

Answer 35

Leverage ratios

Question 36

indirectly measures risk by telling us how much a firm earned for each dollar invested by it’s owners.

Answer 36

Return on equity

Question 37

Tells how effectively management is turning inventory into profit

Answer 37

Activity ratios

Question 38

The five areas accounting is divided into

Answer 38

Financial
managerial
audition
tax
governmental/non-profit

Question 39

Accounting information and analyses prepared for people outside the organization.

Answer 39

Financial Accounting

Question 40

Accounting used to provide information and analyses to managers within the organization to assist them in decision making.

Answer 40

Managerial accounting

Question 41

The job of reviewing and evaluating the information used to prepare a company’s financial statements

Answer 41

Auditing

Question 42

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

Answer 42

Tax accountant

Question 43

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

Answer 43

Government and not-for-profit accounting