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Ground Floor > Chapter 17 > Flashcards

Chapter 17 Flashcards

1
Q

Accounting

A

The recording, classifying, summarizing, and interpreting of financial events and transactions in an organization to provide management and other interested parties

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2
Q

Accounting system

A

Method used to record and summarize accounting data

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3
Q

purposes of accounting

A
  • Help managers make well informed decisions
  • To report financial information about the firm to interested stakeholders (employees, owners, creditors, etc)
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4
Q

FASB

A

The Independent Financial Accounting Standards Board

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5
Q

GAAP

A

Generally accepted accounting principles

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6
Q

Accounting cycle

A

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

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7
Q

Bookkeeping

A

The recording of business transactions

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8
Q

Journal

A

record book or computer program where the day’s transactions are kept by the bookkeeper

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9
Q

Double-entry bookkeeping

A

The practice of writing every transaction in two places so bookkeepers can check one list of transactions against another to make sure they both add up to the same amount

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10
Q

Ledger

A

Specialized accounting book or computer program where bookkeepers transfer information from accounting journals into specific categories so manager can find all the information about a single account in one place

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11
Q

Trial balance

A

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

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12
Q

financial statement

A

A summary of all the financial transactions that have occurred over a particular period. They indicate a firms financial health and stability, and are key factors in management decision making

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13
Q

Key financial statements of a business

A
  1. balance Sheet
  2. income statement
  3. statement of cashflows
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14
Q

Balance sheet

A

reports the firms financial condition on a specific date (Assets, liabilities, owner’s equity)

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15
Q

Income Statement

A
  • Shows a firms bottom line (profit)
    -Summarizes revenues, cost of goods sold, and expenses (including taxes) for a specific period and highlights the total profit or loss the firm experienced during that period
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16
Q

Statement of cash flows

A
  • provides a summary of money coming into and going out the firm. It tracks a company’s cash receipts and cash payments
  • reports cash receipts and disbursements related to the three major actives of a firm (Operations, Investments, Financing)
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17
Q

fundamental accounting equation

A

Assets = Liabilities + Owner’s equity

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18
Q

Assets

A

economic resources (things of value) owned by a firm.
- tangible and intangible items
- are measurable and quantifiable

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19
Q

Liquidity

A

the ease which accountants can convert assets to cash

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20
Q

Current Assets

A

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

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21
Q

Fixed Assets

A

long term assets that are relatively permanent such a land

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22
Q

Intangible Assets

A

long term assets that have no physical form but do have value like patents, trademarks, copyrights.

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23
Q

Liabilities

A

what the business owes to others

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24
Q

current liabilities

A

debts due in one year or less

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25
Q

long term liabilities

A

debts not due for another year or more

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26
Q

Accounts payable

A

current liabilities or bills the company owes others fro merchandise or services it purchases on credit that’s not yet paid for

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27
Q

notes payable

A

can be short or long term that a business promises to pay by a certain date

28
Q

bonds payable

A

long term liabilities

29
Q

retained earning

A

accumulated earning from the firm’s profits that are reinvested in the business and not paid out to stockholders in distributions of company profits

30
Q

Revenue

A

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

31
Q

cost of goods sold

A

measures the cost of merch the firms sells or the cost of raw materials and supplies it used in producing items for resale

32
Q

Gross profit

A

how much a business earned by buying (or making) and selling merchandise

33
Q

depreciation

A

the systemic write-off of the cost of a tangible asset over its estimated useful life

34
Q

cash flow

A

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

35
Q

steps in the accounting cycle

A
  1. analyze source documents
  2. record transactions in journals
  3. transfer journal entries to ledger
  4. take a trial balance
  5. prepare financial statements
  6. analyze financial statements
36
Q

Ratio analysis

A
  • the assessment of a firms financial condition, using calculations and financial ratios developed from the firms financial statements
  • provides key insights into how a firm compares to other firms in its industry on liquidity, amount of debt, profitability, and overall business activity
37
Q

Liquidity ratios

A

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

38
Q

current ratio

A

the ratio of a firms current assets to its current liabilities

current ratio = Current assets / current liabilities

39
Q

acid test / quick ratio

A

measures the cash, marketable securities (such as stocks or bonds) and receivables of a firm, compared to its current liabilities

cash + accounts receivable + marketable securities / current liabilities

40
Q

leverage (debt) ratios

A

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

41
Q

debt to owners equity ratio

A

total liabilities/ owners equity

42
Q

Profitability (performance) ratios

A

measure how effectively a firms managers are using its various resources to achieve profits

43
Q

return on equity

A

measures risk by telling us how much a firm earned for each dollars invested by its owners equity

44
Q

activity ratios

A

tells us how efficiently management is turning their inventory into sales

45
Q

inventory turnover ratio

A

measures the speed with which inventory moves through the firms and gets converted into sales

46
Q

lower than average inventory

A

often indicates obsolete merchandise on hand or boor buying practices

47
Q

Financial accounting

A

generates financial information and analyses for people primarily outside the organization

48
Q

annual report

A

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

49
Q

private accountant

A

works for a single firm, gov agency, or nonprofit organization

50
Q

public accountant

A

provides accounting services to individuals of businesses

51
Q

CPA

A

certified public accountant

52
Q

key provisions of Sarbanes Oxley Act

A
  • prohibits accounting firms from providing certain nonaddicting work to companies they audit
  • strengthens the procreation of those who report wrongful actions of company officers
  • Requires CEOs and CFOs to certify the accuracy of financial reports and imparts strict penalties for any violation
  • prohibits corporate loans to directors and executives of the company
  • establishes PCAOB (Public Company Accounting Oversight Board) under SEC (Securities and Exchange Commissions) to oversee the accounting industry
  • altering or destroying key audit docs will result in felony charges
53
Q

Managerial Accounting

A

provides information and analysis to managers inside the organization assist them in decision making

54
Q

Auditing

A

reviewing and evaluating the info used to prepare a company’s financial statements

55
Q

Independent Audit

A

an evaluation and unbiased opinion about the acutance of a company’s financial statements

56
Q

tax accountants

A

is trained in tax law and is responsible for preparing tax returns, or developing tax strategies

57
Q

government and not for profit accounting

A

supports organizations whose purpose is not generating profit, but serving ratepayers, taxpayers, and others according to a budget

58
Q

10k part 1

A

a comprehensive overview of a company’s operation, products, and or services

59
Q

10k part 2

A

lists financial statements from the company

60
Q

10k part 3

A

details about the company’s senior excecutive team

61
Q

10k part 4

A

exhibits

62
Q

Sustainability reports

A

the environmental, social and governance issues and impacts caused by the company’s everyday activities

63
Q

fiscal period

A

full cycle of business

64
Q

equity

A

residual ownership

65
Q

net operating income

A

how much did a company make from their core business

Ground Floor (1 decks)

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