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acc 202 > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

What are the 4 broad areas of opportunities in accounting?

A

-financial
-managerial
-taxation
-accounting related

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2
Q

Ethics:

A

beliefs that separate right from wrong

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3
Q

3 factors of the fraud triangle

A

-pressure
-opportunity
-rationalization

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4
Q

Measurement(cost) principle:

A

accounting information is based on actual costs incurred in business transactions. cost is measured in cash

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5
Q

Revenue Recognition principle:

A

revenue is recognized when the good or service are provided to customer and at the amount expected to be received from the customer

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6
Q

Expense Recognition(matching) principle:

A

a company records expenses it incurred to generate revenues it reported

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7
Q

Full disclosure principle:

A

a company records the details behind financial statements that would impact users’ decisions, often in footnotes to the statements

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8
Q

What are the 3 constraints on financial reporting

A

-cost benefit
-materiality constraint
-conservatism and industry practice

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9
Q

Cost Benefit Constraint

A

information disclosed by the entity must have benefits to the user that are greater than the costs of providing it

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10
Q

Materiality constraint

A

ability of information to influence decisions

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11
Q

Accounting equation

A

Assets = liabilities + Common Stock - dividends + revenue - expenses

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12
Q

order of creation of 4 financial statements:

A

1) Income Statement
2) Statement of retained earnings
3) Balance sheet
4) Statement of cash flows

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13
Q

Return on Assets(ROA/ROI)

A

Net income / average total assets
* want a high number

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14
Q

Average total assets

A

(beginning total assets + ending total assets) / 2

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15
Q

T-Account

A

A ledger account and is used to understand the effects of one or more transactions

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16
Q

4 steps of processing transactions:

A

1) Identify transaction and source documents
2) analyze transactions using account equation
3) record journal entry
4) post entry to ledger

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17
Q

Debt Ratio:

A

total liabilities / total assets
*high ratio means a company is more likely to not pay off its debts on time
*want a low number

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18
Q

3 steps to make an adjustment

A

1) determine the current account balance
2) determine what the balance should equal
3) record the adjusting entry to get from step 1 to 2

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19
Q

Straight Line Depreciation

A

(Cost - Salvage Value) / Useful life

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20
Q

Classified balance sheet

A

organizes assets and liabilities into important subgroups
*current and non current

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21
Q

Profit Margin:

A

Net income / net sales
-for every $ in sales we make that much profit
-want to be high

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22
Q

Current Ratio:

A

current assets / current liabilities
-a company’s ability to pay its debts
-want to be high

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23
Q

Managerial Accounting:

A

provides financial and nonfinancial information to an organizations managers

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24
Q

Planning:

A

process of setting goals and making plans to achieve them

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25
Q

2 types of planning:

A

Strategic: long term direction
Short term: includes $ and budget

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26
Q

Control:

A

process of monitoring and evaluating an organizations activities and employees

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27
Q

What is the key to stopping fraud?

A

Prevention

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28
Q

To help prevent fraud managers set up an Internal control system to:

A

-ensure reliable accounting
-protect assets
-uphold company policies
-promote efficiency

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29
Q

IMA (Institute for Management Accountants) requires management accountants to:

A

-be competent
-maintain confidentiality
-act with integrity
-communicate information in a fair and credible manner

30
Q

cost object

A

a product, process, department, or customer to which costs are assigned
-cost is either direct or indirect

31
Q

Direct Costs

A

can be cost effectively traced to a cost object.
-consists of direct materials and direct labor

32
Q

Direct Materials:

A

materials that are crucial parts of a finished product.
-cost effectively traced through the manufacturing process to finished goods

33
Q

Direct Labor:

A

employees who directly convert materials into finished goods
-wages and benefits for direct labor

34
Q

Indirect costs:

A

those that cannot be cost effectively traced to a cost object
-includes salary of manufacturing supervisor and wages of maintenance department employees

35
Q

Factory overhead/manufacturing overhead:

A

all manufacturing costs that are indirect materials, indirect labor, and other indirect costs

36
Q

Indirect materials:

A

used in manufacturing that cannot be traced to finished goods
-can be classified as indirect if the costs are very low

37
Q

Indirect labor:

A

labor needed in manufacturing that cannot be traced to finished goods
-costs of workers who assist in or supervise manufacturing but aren’t mainly creating the product

38
Q

Other indirect costs:

A

factory utilities, factory rent, factory depreciation, factory insurance, factory property tax

39
Q

Prime costs:

A

direct materials + direct labor

40
Q

Conversion Costs:

A

Direct labor + factory overhead
-costs incurred in the process of converting raw materials to finished goods

41
Q

Product costs:

A

production costs necessary to create a product.
-Direct materials + direct labor + factory overhead

42
Q

Period Costs:

A

nonproduction costs linked to a time period(not specific to products)
-ex: office employee wage, office rent, delivery expense, commissions, advertising expenses

43
Q

Reporting period costs:

A

go directly to the current income statement as expenses

44
Q

Reporting product costs

A

first assigned to inventory, then if sold moves to COGS, if product is in inventory its on balance sheet

45
Q

Raw materials inventory

A

cost of materials a company acquires to use in making products

46
Q

Work in process inventory

A

consists of costs of direct materials, direct labor and overhead for partially completed products

47
Q

Finished goods inventory

A

consists of the cost of direct materials, direct labor and overhead of completed products ready for sale

48
Q

Merchandiser Balance Sheet:

A

current assets section of the balance sheet for a merchandiser only reports merchandise inventory rather than the 3 types of inventories

49
Q

Merchandiser COGS

A

Beginning merchandise inventory + COG purchased = COG available for sale - Ending merchandise inventory = COGS

50
Q

Manufacturer COGS

A

beginning finished inventory + COG manufactured = COG available for sale - ending finished inventory = COGS

51
Q

Cost of goods manufactured:

A

Raw Materials Used + Direct Labor + Factory Overhead + Beginning Work in Process − Ending Work in Process

52
Q

3 manufacturing activities are:

A

1) Materials Activity
2) Production activity
3) Sales activity

53
Q

Materials Activity:

A

Raw materials inv beg. + raw materials purchases = raw materials available for use in production - raw materials inv ending = raw materials used in production

54
Q

beginning work in process inventory

A

costs of partially complete products from prior period

55
Q

Schedule of cost of goods manufactured (4)

A

1) compute direct materials used
2) compute direct labor used
3) compute factory overhead used
4) compute COG manufactured

56
Q

Raw materials inventory turnover does what?

A

helps managers assess how effectively a company manages its raw materials inventory

57
Q

Raw materials inventory turnover formula:

A

Raw materials used/ avg raw materials inventory
*want high number

58
Q

Average raw materials inventory:

A

(beg. RM inv + end. RM inv.) / 2

59
Q

Days sales in raw materials inventory formula:

A

(End RM inv. / RM used) x 365

60
Q

Days sales in RM inventory reveals…

A

how much raw materials inventory is available in terms of number of days sales.
*prefer lower number

61
Q

When making adjusting entries what should you never adjust?

A

cash

62
Q

How do you calculate net income syd?

A

Revenue - expenses

63
Q

A double-entry accounting system is an accounting system:

A

That records the effect of each transaction in at least two accounts, with at least one debit and one credit.

64
Q

Total Quality Mangement

A

Constant focus on higher standards

65
Q

Just in time manufacturing

A

receive materials, complete parts and complete products just in time for next step

66
Q

A business’s source document

A

identify and describe transactions and events entering the accounting system

67
Q

Total manufacturing costs:

A

1) factory overhead + direct materials + direct labor
2) COG manufactured + WIP ending - WIP beginning

68
Q

T/F: Noncurrent items are expected to come due within one year or the company’s operating cycle.

A

False

69
Q

are factory utilities considered period costs?

A

no

70
Q

is equipment considered a plant asset?

A

yes(somehow???)

acc 202 (4 decks)

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