Exam 1 Material

Question 1

For internal users, focuses on decision making for the manager to make business decisions

Answer 1

Managerial Accounting

Question 2

For external users; reporting back to investors / resource owners. Follows GAAP

Answer 2

Financial Accounting

Question 3

GAAP

Answer 3

Generally Accepted Accounting Principles

Question 4

group of people or entities organized to exchange items of value

Answer 4

Market

Question 5

provide financial resources to a business in exchange for ownership of the business

Answer 5

Investors

Question 6

lend financial resources to a business. Expected to be repaid with interest.

Answer 6

Creditors

Question 7

natural resources in different stages of transformation

Answer 7

Physical Resources

Question 8

intellectual and physical labor

Answer 8

labor Resources

Question 9

parties interested in the operations of a business, including owners, employees, suppliers, customers, and government agencies

Answer 9

Stakeholders

Question 10

resources used in operations

Answer 10

Assets

Question 11

Assets =

Answer 11

Liabilities + Common Stock + Retained Earnings

Question 12

Liabilities + Stockholders’ Equity =

Answer 12

Assets

Question 13

obligations of a business; creditors claim on assets

Answer 13

Liabilities

Question 14

represents the owners claim on assets

Answer 14

Stockholders Equity

Question 15

basic class of corporate stock, carrying no preference

Answer 15

Common Stock

Question 16

includes all earnings retained in the business since inception

Answer 16

Retained Earnings

Question 17

owners and creditors inters in business assets

Answer 17

Claims

Question 18

Span of time covered by the financial statements, normally one year, but may be by quarter, month

Answer 18

Accounting Period

Question 19

Land is recorded at…

Answer 19

Historical Cost

Question 20

price we paid for the assets

Answer 20

Historical Cost

Question 21

market value as of the end of accounting period

Answer 21

Fair Value

Question 22

Creditors are always paid…

Answer 22

First

Question 23

Tell investors what the performance (earnings) of the company was over the accounting period

Answer 23

Income Statement

Question 24

Tell us where we at the end of the accounting period, what our assets are, what liabilities we have, and our stockholders equity

Answer 24

Balance Sheet

Question 25

Cash inflows and outflows from transactions with investors and creditors

Answer 25

Financing Activities

Question 26

cash inflows & outflows for everyday normal business operations

Answer 26

Operating Activities

Question 27

cash inflows & outflows associated with buying or selling long term assets

Answer 27

Investing Activities

Question 28

Accounting system that recognizes expenses or revenues when they occur regardless of when cash is exchanged.

Answer 28

Accrual Accounting

Question 29

Recognition of events before exchanging cash

Answer 29

Accrual

Question 30

Recognition of Revenue or expense in a period after cash is exchanged

Answer 30

Deferral

Question 31

Revenues - Expenses =

Answer 31

Net Income

Question 32

to recognize an expense before we pay it

Answer 32

Accrued Expenses

Question 33

transaction that decreases one claim and increases another, so that the total claims did not change

Answer 33

Claims exchange transaction

Question 34

The Accounting Cycle

Answer 34

1. Record Transactions 2. Adjust Accounts 3. Prepare Statements 4. Close Temporary Accounts

Question 35

recognizing expenses in the same accounting period as the revenues they provide using three methods: Matching expenses directly with revenues (cost of goods sold); Matching expenses to the period in which they incurred (rent expenses) ; and matching expenses systematically with revenues (depreciations )

Answer 35

Matching Accounts

Question 36

liability arising when customers pay cash in advance for services a business will perform in the future

Answer 36

Unearned Revenue

Question 37

The economic benefit (increase in assets or decrease in liabilities) gained by providing goods or services to customers.

Answer 37

Revenues

Question 38

Companies that buy and resell merchandise inventory

Answer 38

Merchandising Business

Question 39

supply of finished goods held for resale to customers

Answer 39

Merchandising Supply

Question 40

companies that sell goods to other business

Answer 40

retail companies

Question 41

Companies that sell goods to other businesses

Answer 41

Wholesale Companies

Question 42

Revenue - Cost of Goods Sold

Answer 42

Gross Margin

Question 43

all costs related to obtaining or manufacturing a product intended for sale to a customers. Accumulated in inventory accounts and expensed as costs of goods sold at the point of sale

Answer 43

Product Costs

Question 44

Costs that cannot be directly traced to products that are recognized as expenses in the period with they are incurred. Ex: advertising, rent

Answer 44

Selling and Administrative Costs

Question 45

General selling and administrative costs that are expensed in the period in which the economic sacrifice is made

Answer 45

Period Costs

Question 46

(Beginning Inventory Balance + Inventory purchased during the period + Transport-in) - purchase returns - allowances and purchase discounts =

Answer 46

Cost of Goods Available for sale

Question 47

the total costs paid to obtain goods and to make them ready for sale, including the cost of beginning inventory plus businesses and transportation-in costs, less purchase returns, allowances and purchase discounts

Answer 47

Cost of Goods Available for sale

Question 48

Total cost incurred for the goods sold during a specific accounting period

Answer 48

Cost of Goods Sold

Question 49

Difference between sales revenue & cost of goods sold; the amount a company makes from selling goods before subtracting operating expenses

Answer 49

Gross Margin ( Gross Profit)

Question 50

method of accounting for inventories that increases the inventory account each time merchandise is purchased and decreases it each time merchandise is sold

Answer 50

Perpetual inventory system

Question 51

A reduction in the cost of purchases resulting from dissatisfaction with merchandise purchased

Answer 51

Purchase allowances/ Purchase returns

Question 52

discount offered on merchandise said to encourage prompt payment; offered by sellers and represents sales discounts to seller when they are used & purchase discounts to the purchaser of merchandise

Answer 52

Cash discount

Question 53

2% discount off the gross invoice if paid within 10 day. full amount due in 30 days

Answer 53

2/n, n/30

Question 54

Reduction in the gross price of merchandise extended under the condition that the purchaser pay cash for the merchandise within a stated time.

Answer 54

Purchase discounts

Question 55

Discount Rate( 365 days / Term of the loan) =

Answer 55

Annual Rate

Question 56

When we (the business) buys goods

Answer 56

Transportation-In

Question 57

when we (the business ) sells goods

Answer 57

Transportation-Out

Question 58

The buyer pays shipping

Answer 58

FOB Shipping

Question 59

The seller pays shipping

Answer 59

FOB Destination

Question 60

reflects decreases in inventory for reasons other than sales to customers

Answer 60

Shrinkage

Question 61

increase in assets or decrease in liabilities that results from peripheral or incidental transaction

Answer 61

gain

Question 62

decrease in assets or increase in liabilities that results from peripheral or incidental transactions

Answer 62

loss

Question 63

cash discount extended by the seller of goods to encourage prompt payment

Answer 63

Sales Discount

Question 64

sales less returns from customers and allowances or cash discounts given to customers

Answer 64

Net Sales

Question 65

amounts are converted to percentages to allow a better comparison of period-to-period or company-to-company financial data is placed on a common basis.

Answer 65

Common Size of Financial Statements

Question 66

method of accounting for changes in the inventory account only at the end of the accounting period

Answer 66

Periodic Inventory system

Question 67

schedule that reflects the computation of the amount of cost of goods sold under the period inventory system; an internal report not shown in the formal financial statements

Answer 67

Schedule of Cost of Goods Sold