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Management Acctg > Chapter 3 > Flashcards

Chapter 3 Flashcards

1
Q

A set of standards or rules that accountants apply when preparing financial statements

A

Financial Reporting Standards

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2
Q

It allows for significant latitude in how certain transactions should be accounted for, meaning that professional judgment is particularly important.

A

Financial Reporting Standards

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3
Q

It shows the financial condition of a company on a particular date. A summary of what the firms own and owes to outsiders and to internal owners.

A

Statement of Financial Position

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4
Q

It includes cash or those assets expected to be converted into longer. Also refers essentially to those assets that are continually used up and replenished in the ongoing operations of the business.

A

Current Assets

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5
Q

The time required to purchase or manufacture inventory, sell the product, and collect the cash.

A

Operating Cycle

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6
Q

Used to designate the amount by which current assets exceed current liabilities (CA-CL).

A

Working Capital/Net Working Capital

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7
Q

Short term and highly liquid investment that are readily convertible to cash and so near their maturity they present insignificant risk of changes in value because of change in interest rates.

A

Cash Equivalents

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8
Q

Cash substitutes, cash that is not needed immediately in the business and is temporarily invested to earn a return.

A

Marketable Securities

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9
Q

Customer balances outstanding on credit sales and reported on the statement of financial position at their net realizable value.

A

Accounts Receivable

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10
Q

Items held for sale or used in the manufacture of products that will be sold.

A

Inventories

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11
Q

3 types of inventories

A
  1. Raw materials/supply
  2. Work in Process
  3. Finished good
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12
Q

These are not material to the statement of financial position as a whole.

A

Prepayments

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13
Q

A company’s fixed assets (tangible-long lived).

A

Property, Plant and Equipment.

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14
Q

Allocating the cost of long-lived assets.

A

Depreciation

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15
Q

The difference between original cost and any accumulated impairment losses to date.

A

Book Value

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16
Q

A firm’s statement of financial position includes a multitude items such as property held for sale, the cash surrender value of life insurance policies, and long-term advance payments.

A

Other Non-Current Assets

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17
Q

It represents claims , against assets, including accounts, notes payable, the current portion of long-term debt, accrued liabilities and deferred taxes.

A

Current Liabilities

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18
Q

Short-term obligations that arise from credit extended by suppliers for the purchase of goods and services.

A

Accounts Payable

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19
Q

Short-term obligations in the form of promissory notes to suppliers or financial institutions.

A

Notes Payable

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20
Q

Result from the recognition of an expense in the accounting records prior to the actual payment of cash. They are liabilities because there will be an eventual cash outflow to satisfy the obligations.

A

Accrued Liabilities

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21
Q

This category include bonded, indebtedness long-term notes payable, mortgages, obligations under leases, pension liabilities, long-term warranties and deferred income taxes.

A

NonCurrent Liabilities

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22
Q

Amounts of income taxes payable in periods in respect of taxable temporary differences.

A

Deferred Tax Liabilities

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23
Q

The residual interest of assets that remain after deducting liabilities.

A

Equity

24
Q

They do not ordinarily received a fixed return but do have voting privileges in proportion to ownership interest.

A

Ordinary shareholders

25
Q

The amount by which the original sales price of the stock shares exceeded par value as well as from other sources such as donated capital, treasury stock transactions.

A

Additional Paid in Capital

26
Q

These include preferred stock foreign currency translation effects, treasury stock and the accumulation of unrealized gains or kisses in investments in debt and equity securities that are classified as non current investment.

A

Other Equity Accounts

27
Q

These are measured on an accrual rather than a cash basis.

A

Earnings

28
Q

It comes in two basic formats and with considerable variations in detail presented; multiple step format and single step version.

A

Income statement

29
Q

It provides several intermediate profit measures-gross profit, operating profit, and earnings before income tax-prior to the amount of net earnings for the period.

A

Multiple-step format

30
Q

Groups all items of revenue, then deducts all categories of expense to arrive at a figure for net income.

A

Single-step version

31
Q

It occurs when a firm sells a major portion of its business.

A

Discontinuing operations

32
Q

Cancellation of sale

A

Sales return

33
Q

Deduction from the original sales invoice price.

A

Sales Allowance

34
Q

The first deduction from sales.

A

Cost of Goods sold/Cost of sales.

35
Q

The relationship between cost of goods sold and net sales is called _______.

A

COGS Percentage

36
Q

Net sales - COGS=?

A

Gross profit or gross margin.

37
Q

The first step of profit measurement on the multiple-step income statement. It indicates how much profit the firm is generating after deducting the cost of products sold.

A

Gross profit

38
Q

Include selling and administrative, advertising , lease payments, depreciation and repairs and maintenance

A

Operating expenses

39
Q

Expenses that relate to the sale of products or services and to the management of the business.

A

Selling and administrative expenses

40
Q

They include salaries, rent, insurance, utilities, supplies and sometimes depreciation and advertising expense.

A

Selling and administrative expenses

41
Q

A major expense in the budgets of companies for which marketing is an important element of success.

A

Advertising cost

42
Q

The cost of rentals of leased facilities for retail outlets.

A

Lease payments

43
Q

Asset that considered to have an unlimited useful life.

A

Land

44
Q

The term applied to the cost expiration of intangible assets such as patents, copyrights, trademarks, licenses, franchises, and goodwill.

A

Amortization

45
Q

Through this, the cost of acquiring and developing natural resources is allocated.

A

Depletion

46
Q

The annual cost of repairing and maintaining the property, plant and equipment. Expenditure in this area should correspond to the level of investment in capital equipment and to the age and condition of the company’s fixed assets

A

Repairs and maintenance

47
Q

Also called EBIT, the second profit determination and measures the overall performance of the company’s operations.

A

Operating profit

48
Q

This category includes revenues and costs other than from operations such as dividend and interest income, interest expense, gains/losses from the sale of fixed assets.

A

Other Income (expenses)

49
Q

The bottom line represents the firm’s profit after consideration of all revenue and expense reported during the accounting period.

A

Net Earnings

50
Q

The net earnings for the period divided by the average number of ordinary shares outstanding.

A

Earnings per ordinary share

51
Q

What PAS # prescribes that an enterprise should present as a separate component of financial statements along with the traditional FS?

A

PAS 1

52
Q

What PAS # requires that the statement should provides information about cash inflows and outflows during an accounting period segregated according to separating activities, investing and financing.

A

Cash Flow Statement

53
Q

Major classes of gross cash receipts and gross cash payments are disclosed.

A

Direct Method

54
Q

Net income or loss is adjusted for the effects of transactions of a non-cash nature.

A

Indirect Method

55
Q

Principal revenue-producing activities of an enterprise and include delivering or producing goods for sale and providing services.

A

Operating activities

56
Q

The acquisition and disposition of property, plant and equipment and other long term assets, debt and equit.

A

Investing activities

57
Q

It includes obtaining resources from and returnings resources to owners as well as obtaining resources through borrowings and repayments of the amounts borrowed.

A

Financing activities

Management Acctg (6 decks)

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