Accounting Chapter 7

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Managerial Accounting

The area of accounting that focuses on reporting information to internal users

Financial Accounting

The area of accounting which focuses on reporting information to external users

Ratio Analysis

The calculation and interpretation of a financial ratio

Return on Sales (ROS)

The ratio of net income to total sales

Calculation for Total Expenses Ratio

Total Expenses / Total Sales= Total Expenses Ratio

Calculation for Net Income

Total Revenue-Total Expenses=Net Income

How to find Current Capital with Net Loss

Capital account balance- Net loss- Drawing account balance = current capital

Four Sections of the Balance Sheet

-Heading -Assets -Liabilities -Owner's Equity

Pay Yourself First

A budgeting strategy of setting aside at least 10% of after-tax income for saving and investing

Financial Ratio

A comparison between two components of financial information

Budget

A financial road map used by individuals and companies as a guide for spending and saving

Deficit

A negative balance that remains after total expenses are subtracted from total income

Surplus

A positive balance that remains after total expenses are subtracted from total income

Stakeholders

Any person or groups who will be affected by an action

How to find Current Capital with Net Income

Capital account balance + Net income - Drawing account balance = current capital

Calculation for Net Income Ratio

Net Income / Total Sales= Net Income Ratio

Vertical Analysis

Reporting an amount on a financial statement as a percentage of another item on the same financial statement


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