BUSG 129 Chapter 17 learn smart

In accounting, liabilities refer to ______.

debts a business owes to others.

The formula for the costs of goods sold is ______.

purchase price + freight charges + storage costs.

An indirect measure of risk that tells us how much a firm earned for each dollar invested by its owners is called ______.

return on equity.

A ______ accountant is trained in tax law and is responsible for preparing tax returns or developing tax strategies.

tax

A ______ accountant is trained in tax law and is responsible for preparing tax returns.

tax

Because they indicate a firm's financial health and stability, the use of ______ are key factors in management decision making.

financial statements

Items of value owned by a firm are called ______.

assets.

Leverage or debt ratios measure the degree to which a firm relies on ______.

borrowed funds.

It's possible for a business to increase its sales and profits yet still suffer ______ flow problems.

cash

The statement of cash flows is a financial statement that shows ______.

cash receipts and disbursements.

Which are steps in the accounting cycle?

record transaction in the journal, prepare a trial balance, and analyze transactions.

What is considered to be the "language of business"?

accounting

The primary users of government and nonprofit accounting information are ______.

special interest groups, taxpayers, and legislative bodies.

An advantage of the use of computers to maintain and compile accounting information is ______.

speed.

The ratios that measure the effectiveness of a firm's management in turning over inventory are called ______.

activity ratios.

Calculating and interpreting financial ratios developed from the firm's financial statements is called:

ratio analysis.

Users of managerial accounting information include ______.

the Chief Financial Officer and department managers.

The ability to read, understand, and analyze accounting reports and financial statements is critical in understanding ______.

business operations.

Which three activities are part of the function of accounting?

interpreting financial transactions, classifying financial transactions, and recording financial transactions.

The role of an auditor is to ______.

review and evaluate a company's financial information.

What are some benefits of using computers for accounting purposes?

It frees accountants' time for more important tasks. Software can help if no strong accounting support is available. Information can be posted from journals instantaneously.

______ ratios measure a company's ability to turn assets into cash to pay its short-term debt.

Liquidity

Reviewing and evaluating records used to prepare a company's financial statements is referred to as ______.

auditing.

Government and nonprofit accounting involves working for organizations whose purpose is to serve ______.

ratepayers and taxpayers.

Managerial accounting is used to provide information ______.

inside the firm.

______ ratios tell us how effectively management is turning over inventory.

Activity

What are four main types of financial ratios used in ratio analysis?

Activity ratios, liquidity ratios, debt ratios, and profitability ratios.

In the Fundamental Accounting Equation: ______ = Liabilities + Owner's Equity

Assets

______ are economic resources owned by a firm.

Assets

Which three components make up the fundamental accounting equation?

Assets, liabilities, and owners' equity.

What term describes the cost of merchandise the firm sells?

Cost of goods sold.

True or false: Gross profit is what a company shows on their income statement as the bottom line figure.

False

Which are considered to be the working areas of accounting?

Financial accounting, government and not-for-profit accounting, managerial accounting, tax accounting, and auditing.

______ and nonprofit accounting supports organizations whose purpose is not generating a profit, but serving ratepayers, taxpayers, and others according to a duly approved budget.

Government

The ______ ______ is the yearly statement of the firm's financial condition, progress, and expectations provided to stakeholders.

annual report

Stakeholders who want to look at detailed financial information on whether a company is profitable, is able to pay its bills, and how much debt it owes will look at the firm's ______.

annual report.

Net income is ______.

all revenue minus all expenses and taxes.

______ is the monetary value of what a company received for goods sold, services rendered, and all other payments to the firm.

Revenue

What type of ratio measures a company's ability to turn assets into cash to pay its short-term debts?

Liquidity ratio.

Since converting the firm's inventory to profits is a key function of management, firms use ______ to measure the effectiveness of management in utilizing the assets that are available.

activity ratios

Operating expenses include which of the following?

utilities, rent, and supplies.

Which financial statement shows a firm's bottom line—its profit (or loss) after costs, expenses, and taxes for a specific period?

Income statement.

What type of ratios measure the degree to which a firm relies on borrowed funds in its operations?

Leverage.

What is another name for debts?

Liabilities.

How do cash flow problems usually start?

The firm uses up its credit.

Assets, liabilities, and owners' equity are the major accounts listed on ______.

a balance sheet.

The income statement shows ______.

a firm's profit (or loss) after costs, expenses, and taxes.

Through the recording, classifying, summarizing, and interpretation of financial events in an organization, the function of ______ helps managers make good decisions about the firm's operations.

accounting

The key working areas of accounting include managerial accounting, financial accounting, tax accounting, government and nonprofit accounting, and ______.

auditing.

The best way to understand a firm's financial health and stability is to look at its ______.

financial statements.

The statement of cash flows reports cash receipts and disbursements related to ______, investments, and financing.

operations

On a balance sheet, assets may include ______.

tangible, intangible resources, and goodwill.

Return on equity is net income minus taxes divided by ______.

total owners' equity.

List the steps in the accounting cycle from beginning to end. Place the first step on top and list them down to the last step on the bottom.

1. Analyze source documents. 2. Record transactions in journals. 3. Transfer journal entries to a ledger. 4. Take a trial balance. 5. Prepare financial statements. 6. Analyze financial statements.

What type of accountant is most likely to develop strategies for a firm in dealing with the Internal Revenue Service?

Tax accountant.

The ______ statement summarizes profit (or loss), costs, and expenses over a specific period, which may be a week, a month, or a year.

income

The current ratio is an example of a(n) ______ ratio that measures a company's ability to turn assets into cash to pay its short-term debts.

liquidity

In operating a business, rent, salaries, supplies, utilities and insurance are all examples of ______.

operating expenses.

The assessment of a firm's financial condition and performance through calculations and interpretation of financial ratios developed from the firm's financial statements is called ______ analysis.

ratio

The monetary value of what a firm received for goods sold, services rendered, and other payments is termed ______.

revenue.