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Accounting > Foundations of Accounting (Linkedin Learning) > Flashcards

Foundations of Accounting (Linkedin Learning) Flashcards

1
Q

Four basic types of accounting?

A

Bookkeeping, Financial, Managerial, Income Tax

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2
Q

Def: Bookkeeping

A

The presentation of a systematic, quantitative record of an activity

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3
Q

Def: Financial Accounting

A

The summary of results of a business for external audiences

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4
Q

Def: Balance Sheet

A

Lists an organization’s assets/resources and liabilities/obligations

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5
Q

Def: Managerial Accounting

A

The summary of detailed, private information used to help an organization plan, control, and evaluate its operations

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6
Q

When is income taxed?

A

Income is taxed when it is earned (since the person now has the ability to pay)

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7
Q

Accounting Equation

A

Assets = Liabilities + Equity

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8
Q

Def: Assets

A

Resources owned or controlled by a company with probably future benefit

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9
Q

Def: Receivables

A

A contract guaranteeing you will receive money in the future

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10
Q

Def: Liabilities

A

Obligations that will require future sacrifice, either by paying assets or delivering services

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11
Q

Def: Owner’s Equity

A

The amount owners have invested in a company

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12
Q

Def: Paid-in-Capitial

A

Owner’s personal investment in their business (from personal account)

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13
Q

Def: Retained Earnings

A

Earnings reinvested into the business

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14
Q

Def: Dividends

A

The amount of profits the owners have removed from the business

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15
Q

Def: Short term

A

In the accounting sense, less than a year

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16
Q

Def: Accounts Payable

A

Amount owed to suppliers for inventory that was received but not paid for

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17
Q

What does high accounts payable mean about the trust suppliers have for the company?

A

Suppliers have high trust that they will settle their accounts payable

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18
Q

Two major limitations of the balance sheet?

A

1) Reflect the costs at time of acquisition and not current market value
2) Intangible assets are not recorded (name, logo, customer loyalty)

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19
Q

Three key financial reports?

A

Balance Sheet, Income Statement, Statement of Cash Flows

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20
Q

Balance sheet captures this time period?

A

It’s a snapshot of a point in time

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21
Q

Income statement captures this time period?

A

It’s captures a period of time for which is was written (month, quarter, year, etc)

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22
Q

Def: Net Income

A

Revenue - Expenses

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23
Q

Def: Revenue

A

Amount of assets created from the sale of goods and services

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24
Q

Def: Expenses

A

Amount of assets consumed through business operations

25
Q

Def: Earnings

A

Earnings is synonymous with net income

26
Q

Earnings per share (EPS)

A

Net Income divided by the number of ownership shares

27
Q

What is Top-line Revenue?

A

Total Revenue on the Income Statement

28
Q

What is the bottom line?

A

Synonymous with Net Income

29
Q

Profit Margin

A

Net Income divided by Total Revenue

30
Q

What does profit margin of 2% mean?

A

That means on every 100 dollars of revenue the company makes 2 dollars of profit. Or for every dollar of revenue the company makes 2 cents

31
Q

What is the purpose of the Statement of Cash Flow?

A

Report the amount of cash collected and cash paid by a company during a period of time.

32
Q

Three categories of a statement of cash flow?

A

Operating activities, investing activities, financing activities

33
Q

Def: Operating Activities

A

Cash coming in and out of the business due to everyday operations of the business

34
Q

Def: Investing Activities

A

Cash coming in and out of the business effecting the productive capacity of the business

35
Q

Def: Financing Activities

A

Cash coming in and out of the business raised to pay for the operations and investing activities

36
Q

Def: Cash Cow

A

Operating Inflow is much larger than investing outflow

37
Q

Def: Return on Investment (ROI)

A

Measurement that combines sales profitability and operational efficiency

38
Q

Three pieces of product costing?

A

Direct Materials, Direct Labor, and Overhead Costs

39
Q

Def: Direct Material

A

“stuff” a product is made out of

40
Q

Def: Direct Labor

A

cost of labor a product takes to produce (amount of time * hourly rate of labor involved)

41
Q

Def: Overhead costs

A

cost of infrastructure and utilities used in the production of a product

42
Q

What is the traditional approach to assigning overhead costs?

A

assign a proportion based on the amount of labor hours for a product

43
Q

Def: Break Even Analysis

A

Analysis of the fixed and variable costs in an operation and the amount of “sales” needed to recoup initial investment

44
Q

Def: Variable Costs

A

Costs that fluctuate depending on the quantity of products/services that are delivered

45
Q

Def: Contribution Margin

A

Profit per customer after subtracting variable costs

46
Q

Def: Budgeting

A

Systematic quantitative plans on paper to predict the future

47
Q

Why is performance evaluation a part of managerial accounting?

A

Find the right thing to measure and you will never have to remind your employees

48
Q

How can mission statements help managerial accounting?

A

They show you where accounting measures should be directed

49
Q

Why is it hard for governments to collect income tax?

A

1) What counts as income?
2) How do you verify this income?
3) What are acceptable deductions?
4) How do you collect it?

50
Q

What taxes have governments historically relied on instead of income taxes?

A

Property tax, head taxes, and import/export fees

51
Q

Def: Average Tax Rate

A

Taxes Owed divided by the income

52
Q

Def: Marginal Tax Rate

A

rate you will pay on the next dollar of income you make

53
Q

Def: Progressive Tax System

A

A tax system is progressive when the average tax rate increases as you make more money

54
Q

Where are tax deductions applied?

A

Tax deductions reduce your taxable income

55
Q

Where are tax credits applied?

A

Tax credits are removed from the amount of taxes owed

56
Q

Def: Ordinary Income

A

Wages, salary, and interest on savings

57
Q

Def: Capital Gains

A

Income or profits made from an investment

58
Q

Capital Gain Tax Shelters

A

These take many forms but they structure your income so it can be classified as capital gains income

Accounting (1 decks)

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