financial literacy (module 4)
What are common depreciation methods except:
1) Declining-balance 2) Straight-line 3) Units of production
Different types of Accounting Journals
1= assets 2=liabilities 3=equity 4=revenues 5=cogs 6=expenses 7=taxes
the cash flow statement is broken into:
2 categories,the Beginning balance & ending balance.
Profitability is measured by how many variants?
3
What is the margin percentage for a product with $5 revenue and $3 cost?
5-3/3==40%
Equity is
A debt.. Example, money owners put into the business and money business earns over time.
When sales are made on account, what happens on the balance sheet?
Account receivable increases
Current liabilities include
Accounts payable, which is any debt due to supplies.
An account with the word "prepaid" in the title is a(n):
Asset
COGS should be reported
At the time of sales
The Financial Statement documents are:
Balance sheet, income statement , cash flow statements, statement of change in equity.
When faced with uncertainty about the amount at which assets and liabilities should be recorded, accountants should follow which principle, in order to avoid misleading users of financial statements?
Conservatism
Expenditures are divided into which 2 categories?
Cost and Expenses/
Expenses are:
Costs incurred to generate revenues
Liabilities are reported in 2 categories
Current Liabilities & Long term Liabilities
Which depreciation method is considered an accelerated method?
Declining-balance
Activities involving obtaining necessary funds to purchase long-term assets, repay existing obligations and provide a return for owners are referred to as:
Financing activities
The first Profitability variant is called
GRoss Margin; which measures profitability from production activities. .
the accounting concept which assumes that, absent any information to the contrary, the business will continue into the foreseeable future is the:
Going concern concept
The formula to calculate Operating Income is
Gross Margin - Operating cost.
Negative Cash Flow is not always bad news
IF its do to more investment or repayment of loans, it could a positive.
A credit is used to record a(n):
Increase in a liability account
Net Fixed Assets
Items necessary to run a business BUT DO NOT VARY
the 7 types of accounting journals are summarized where?
LEDGER
Which inventory costing method assigns the earliest units received to cost of goods sold?
LIFO
Assets equal what?
Liabilities + equity
Accounting journals
Made of transactions. These Transactions are categorized into revenue, cost and taxes.
Financial Statements are:
Made up of 4 documents and focus on PAST performance of a company
What is NET INCOME
Money earned, but not yet PAID. It is also called the BOTTOM LINE.
The third Profitability variant is called
Net income, which measures,Gross Margin, operating expenses & any non related expenditures.
the second Profitability variant is called
Operating income; which measures GRoss Margin & operating Expenses.
Example of a Balance Sheet
Owns=machinery, properties, assets Owes=Bank loans,debt, taxes
Income statement
P&L. Summary of sales, expenses, & profits of a company. Think COGS, Revenues ,Expenses & taxes
he accounting concept requiring that the profits of a business be determined at regular intervals throughout the life of the business is the:
Periodicity concept
_____ is/are not an example of non-operating income or expense.
RENT
Cash Flow statements
Record of $$ in the bank . Includes, inflow, outflow and reserve of $$$
What are the requirements for information to be useful?
Relevance and reliability
How do you measures Gross Margin?
Revenue - Cost
Which depreciation method produces an equal amount of depreciation each period?
Straight line
Only Public Companies have to publish Financial Statements... True or False?
TRUE
Liabilities are
The NEGATIVE side of the balance sheet . Think Loan, refurbishment
Assets are
The POSITIVE Side of the BALANCE SHEET and have A DOLLAR VALUE. Think Cash, property, machinery
whats the difference between revenue and cash?
The income statement reports revenue the cash flow statement reports cash.
The cash flow statement is
The last statement in the financial statement. it records cash over a period of time.
COGS are reported at
Time of SALE in the INCOME STATEMENT
Amortization:
a method used to allocate the cost of an intangible asset over its limited useful life
A system used to identify, analyze, measure, record, summarize and communicate relevant economic information to interested parties is referred to as a(n):
accounting system
When a company borrows cash from a bank, what will occur?
an increase in cash
Long term Liabilities are
any debt NOT due within the next 12 months.
Activities involving the purchase and sale of long-term assets as well as other major items used in a business's operation are referred to as:
investing activities
the ____________________ requires that the expenses incurred to generate revenue should be recognized in the same period.
matching principal
financial statements can be fond
on the SEC website
Balance Sheet
record of what the company owns and owes. Think Asset, Liabilities and Equity
Statement of changes in equity
records changes in company ownership between shareholders. (not key document)
The SALE becomes Revenue only when
the invoice is issued. (before that there is no formal agreement)
In the sales cycle, the sale is entered as revenue only
when the invoice has been issued