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Financial Accounting > Final Exam - Fairchild > Flashcards

Final Exam - Fairchild Flashcards

1
Q

What is the primary mechanism used to allocate resources in the United States?

A

open market

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2
Q

Difference between financial and managerial accounting:

A

FINANCIAL - external users (ex. investors, creditors, lawyers, financial analysts)

MANAGERIAL - internal users (ex. managers, employees who work within a business)

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3
Q

GAAP

A

Generally Accepted Accounting Principles

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4
Q

FASB

A

Financial Accounting Standards Board

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5
Q

Retained Earnings

A

increase in the business commitments to its stockholders

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6
Q

Dividend

A

the distribution of assets generated through earnings

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7
Q

accounting equation:

A

assets = liabilities + equity

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8
Q

Common Stock

A

specific commitments made to investors

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9
Q

Liabilities

A

what we “owe”

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10
Q

Assets

A

what we “own”

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11
Q

Equity

A

what is “ours”

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12
Q

Investors

A

provide financial resources in exchange for ownership interests in businesses

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13
Q

Creditors

A

lend financial resources to businesses (bank)

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14
Q

Market:

A

group of people organized to exchange items of value

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15
Q

Revenue

A

economic benefit a company obtains from providing goods and services to its customers

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16
Q

Expense

A

economic sacrifice a business incurs in the process of generating revenue

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17
Q

General Ledger

A

a means for keeping record of a company’s total financial accounts

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18
Q

Liquidation

A

the process of selling off a company’s inventory, typically at a big discount, to generate cash

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19
Q

How does the balance sheet work?

A

total assets balance with liabilities plus equity

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20
Q

What is the statement of changes in stockholders equity?

A

CS:
bb
+
-
EB

and

RE:
bb
+
-
EB

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21
Q

What is the statement of cash flows?

A

how a company obtained and used cash during the accounting period (Financing, Investing, Operating activities)

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22
Q

What is in a temporary account?

A

revenue, expenses, dividend

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23
Q

Accrual

A

do service BEFORE cash

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24
Q

Deferral

A

do service AFTER cash

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25
Q

How do you find the interest?

A

interest = principle x rate x time

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26
Q

How do you calculate the depreciation?

A

cost - salvage/life

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27
Q

How do you calculate the percentage change?

A

new - old/old

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28
Q

Accounts Receivable

A

receive money in the future

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29
Q

Accounts Payable

A

paying money in the future

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30
Q

Normal Balance Account

A

whichever side the plus sign is on with debits and credits

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31
Q

FOB

A

Freight On Board

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32
Q

Shipping Point

A

BUYER PAYS for shipping

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33
Q

Destination Point

A

SELLER PAYS for shipping

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34
Q

How do you find the NI?

A

Sales Revenue
<COGS>
-------------------------------
Gross Margin</COGS>

<operating>
--------------------------------
operating income
\+/- other <------------ (gains/losses)
--------------------------------
pre tax
<tax>
--------------------------------
Net Income
</tax></operating>

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35
Q

Financial Leverage

A

use debt to buy more assets

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36
Q

Period Costs

A

the period when selling and administrative costs are incurred

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37
Q

Perpetual Inventory

A

account is adjusted continually throughout accounting period

38
Q

Gains

A

difference between sales price and cost of land

39
Q

How do you find the common size?

A

divide everything by sales

40
Q

Financial Activity

A

debt, equity

41
Q

Operating Activity

A

current assets

42
Q

Investing Activity

A

long term assets

43
Q

What are the requirements for double entry accounting system?

A

debit and credit

44
Q

Balance of Account

A

total assets - total liabilities

45
Q

What is posting?

A

reflects accounts balances immediately after closing entries were posted

46
Q

What is the purpose of a journal?

A

provides chronological of business transactions

47
Q

What is the purpose of closing entries?

A

to move all year 2 temporary accounts into RE

48
Q

FIFO

A

first in, first out

49
Q

LIFO

A

last in, first out

50
Q

FIFO advantages and disadvantages:

A

ADVANTAGES:
- higher NI
- higher inventory
DISADVANTAGES:
- higher taxes
- lower inventory turnover

51
Q

LIFO advantages and disadvantages:

A

ADVANTAGES:
- lower taxes
- higher inventory turnover
DISADVANTAGES:
- lower NI
- lower inventory

52
Q

What is a direct write-off method?

A

an accounting method by which uncollectible accounts receivable are written off as bad debt (debit BDE (bad debt expense) credit AR)

53
Q

What is the allowance method?

A

an estimated amount set aside to account for future expenses, potential losses, or reductions in asset values (debiting bad debt expense, crediting allowance for uncollectible accounts)

54
Q

Net Realizable Value

A

amount of receivables a company estimates it will actually collect

55
Q

Internal Controls

A

policies and procedures used to provide reasonable assurance that the objectives of an enterprise will be accomplished (ex. control environment, risk assessment, control activities, information and communication, monitoring)

56
Q

Accounting Controls

A

designed to safeguard company assets and ensure reliable accounting records

57
Q

Administrative Controls

A

concerned with evaluating performance and assessing the degree of compliance with company policies and public laws

58
Q

Unqualified Opinion

A

most favorable opinion, auditors believe financial statements are in compliance with GAAP without material qualification, reservation or exception

59
Q

Adverse Opinion

A

1 or more departures from GAAP are so FS don’t present a fair picture of company’s status

60
Q

Qualified Opinion

A

company’s FS are in compliance with GAAP but auditors have reservations about something in the statements

61
Q

DM (debit memo)

A

decreasing

62
Q

CM (credit memo)

A

increasing

63
Q

Petty Cash

A

small amount of cash

64
Q

Reconcile

A

come back into agreement

65
Q

Gross Pay

A

what employees earn before taxes

66
Q

Net Pay

A

what employees earn after taxes

67
Q

Solvency

A

ability to repay liabilities in the long run

68
Q

What is the inventory turnover ratio?

A

inv.

69
Q

What is the markup on cost ratio?

A

COGS

70
Q

What is the markup on sales ratio?

A

sales

71
Q

what is the operating cycle?

A

Cash

AR Inv.

72
Q

Current Assets

A

within a year

73
Q

Long Term Assets

A

more than a year

74
Q

PE (price to earnings) ratio:

A

earnings per share

75
Q

What is APIC (additional - paid - in - capital)?

A

difference between book value and market value

76
Q

What are capital assets?

A

short term assets

77
Q

What is goodwill?

A

good name of a company

78
Q

What is a tangible asset?

A

you can touch the idea of the asset

79
Q

What is an intangible asset?

A

you can’t touch the idea of the asset (ex. copywright, patent, trademark, goodwill)

80
Q

What do we use with tangible assets?

A

depreciation (SL, UOP, DDB)

81
Q

What do we use with intangible assets?

A

amortization (SL)

82
Q

What do we use with natural resources?

A

depletion (UOP)

83
Q

Operational Assets are

A

long term assets

84
Q

Face Value

A

amount paid on the maturity of the bond

85
Q

Stated Interest Rate

A

this is the interest rate applied to the interest payments made to bond holders

86
Q

What is the nature of AR?

A

it is a current asset

87
Q

What is the nature of ADA?

A

it is a contra asset, because it reduces the amount of an asset, in this case the AR

88
Q

Notes Payable (NP)

A

a written promise made by the business to pay a debt, usually involving interest, in the future

89
Q

Net Loss

A

when expenses are greater than revenue

90
Q

Salary Payable

A

what you owe employees but have not yet paid

91
Q

How do you find NRV?

A

A/R

<ADA>
------------
NRV
<ADA>
</ADA></ADA>

92
Q
A

Financial Accounting (4 decks)

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