Business

The Red Cross is a nonprofit firm. As such, it would most likely require the services of which type of professional to prepare its financial statements?

a public or private accountant

Accounting reports and financial statements ______

are important for both profit and nonprofit organizations

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

Which are common financial transactions?

buying and selling goods acquiring insurance paying employees

Basic earnings per share is the ratio of net income after taxes to:

common stock shares outstanding

An accountant's time is freed up to do more important tasks such as financial analysis due to the assistance provided by using ______.

computerized accounting programs

Managerial accounting is concerned with

controlling measuring production costs preparing budgets

What term describes the cost of merchandise the firm sells?

cost of goods sold

In accounting, liabilities refer to ______.

debts a business owes to others

Return on ____ is net income after taxes divided by total owners' equity.

equity

A summary of all the financial transactions that have occurred over a particular period is referred to as a ______.

financial statement

A company's net sales minus cost of goods sold is called ______.

gross profit

The debt a firm owes to others is called a(n) ______.

liability

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

liquidity

Which are stakeholders of a business?

management suppliers employees

What are the three major categories shown on an income statement?

operating expenses net income revenue

In the accounting equation, what is the term for the difference between assets and liabilities?

owner's equity

Financial accounting and managerial accounting differ in terms of who uses the information. Financial accounting provides information primarily for ______.

people outside the organization

When conducting an independent audit the accountant is to evaluate a company's financial statements and ______.

provide an unbiased opinion about their accuracy

The primary users of government and nonprofit accounting information are _____

- legislative bodies - special interest groups - taxpayers

A CPA must ______

- meet state's requirements for education and experience - pass a series of exams

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.

The inventory _____ ratio is the cost of goods sold divided by the average inventory

Turnover

What is an annual report?

a yearly statement of the financial condition, progress, and expectations of an organization

Which are common financial transactions?

acquiring insurance paying employees buying and selling goods

Costs such as rent, salaries, utilities, and insurance are known as ______.

Operational expenses

Of the three major activities of a firm, _____ are cash transactions associated with running the business.

Operations

Of the three major activities of a firm, cash transactions associated with running the business are known as ______

Operations

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

Operations

Of the three major activities of a firm, ____ are cash transactions associated with running the business.

Operations

The recording of business transactions is done by ______, whereas ______ classify and summarize financial data to help managers in decision-making

bookkeepers; accountants

The _______ line is another name for net income after taxes

bottom

A statement of ____ _____ provides a summary of money coming into and going out of the firm.

cash flows

Users of managerial accounting information include:

department managers the Chief Financial Officer

Cash flow analysis is especially important for which of the following?

small businesses

An acid-test ratio between _____ and 1.0 is usually considered satisfactory but could also be a sign of some cash flow problems.

0.5

Transactions that are entered in the journal are then posted to specific categories in a(n) ______.

ledger

The purposes of auditing include:

looking into operational effectiveness and efficiency examining the financial health of an organization reviewing records

When conducting an independent audit the accountant is to evaluate a company's financial statements and _____

provide an unbiased opinion about their accuracy

The purpose of the Sarbanes-Oxley Act was to ______

provide greater scrutiny of the accounting industry

Which three components make up the fundamental accounting equation?

assets, liabilities, owner's equity

_____ accounting generates financial information for people outside the firm, while ____ accounting generates financial information for people inside the firm.

financial and managerial

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 ledger 4. Take a trial balance 5. Prepare financial statements 6. Analyze financial statements

What are the key financial statements of a business?

1. Balance Sheet 2. Income Statement 3. Statement of Cash Flows

An evaluation and unbiased opinion about the accuracy of a company's financial statements is called _______

Independent

Management decision making is based on a firm's financial health and stability which are shown on the ______.

financial statements

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

leverage

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

liquidity ratio

An accounting system is used to ______.

record and summarize accounting data into reports

Cash receipts and disbursements related to operations, investments, and financing are reported on the ______.

statement of cash flows

Which are stakeholders of a business

suppliers employees management

On the statement of cash flows financing activities would include ____

taking on new debt paying dividends paying past debt

What are the three major activities of a firm shown on the statement of cash flow

financing investments operations

What is the term given to a specialized accounting book or computer program in which information is transferred into specific categories, so managers can find all the information about a single account in one place?

ledger

_____ accounting is used to provide information to managers within the organization to assist them in making decisions

managerial

______ accounting is used to provide information to managers within the organization to assist them in making decisions.

managerial

In the accounting scandals of the early 2000s, Arthur Andersen was convicted of ______.

obstruction of justice

____ ratios measure how effectively a firm is using its various resources to achieve profits

profitability

The job of a bookkeeper is to ______, whereas the job of an accountant is to ______

record business transactions; summarize financial data

A company's financial statements help the firm's ______, such as employees, owners, or investors make informed decisions

stakeholders

A company's financial statements help the firm's ______, such as employees, owners, or investors make informed decisions.

stakeholders

The three major activities of operations, investments, and financing are included on which financial statement?

statement of cash flows

The information and analysis that comes from managerial accounting is used to ______.

assist managers inside the organization with their decision making

A(n) _____ _____ reports the firm's financial condition on a specific date.

balance sheet

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

activity

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

The purposes of auditing include ____

examining the financial health of an organization looking into operational effectiveness and efficiency reviewing records

The purposes of auditing include _____

examining the financial health of an organization reviewing records looking into operational effectiveness and efficiency

Stockholders, labor unions, employees, and the Internal Revenue Service are all interested in the financial health and stability of a firm. This information can be found in a firm's ______.

financial statements

Buying and selling goods and services, acquiring insurance, paying employees, and using supplies are all examples of ______.

financial transactions

Of the three major activities of a firm, cash raised from the issuance of new debt is known as ______.

financing

Managerial accounting is concerned with

measuring production costs preparing budgets controlling

The primary purpose of the Sarbanes-Oxley Act is one of ______

oversight

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

Nonprofit organizations need accounting professionals to:

show that their funds are well-managed show that their money is being spent properly show donors that money is spent for the designated cause

What are two major purposes of accounting?

to help managers make informed decisions to report financial info abt the firm to stakeholders

A current ratio of 2 means that the business has $2 of current assets for every ______.

$1 of current liabilities

In using the accounting equation, if assets = $40,000 and liabilities = $30,000, then owner's equity is equal to ______.

$10,000

Sales, purchasing, and shipping documents are all considered examples of ____ to an accounting system.

inputs

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

Debt ratios Activity ratios Profitability ratios Liquidity ratios

The downfall of Arthur Andersen was related to which scandal?

Enron

Which companies were involved in major accounting scandals in the early 2000s?

Enron Tyco WorldCom

_____ is cash raised from the issuance of new debt or equity capital

Financing

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

tax accountant

What is the primary report given to the IRS by an organization?

tax return

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

_____ are economic resources owned by a firm

assets

What type of information is reported by accounting to stakeholders?

financial

The first step in the accounting cycle is to ______.

Analyze source documents

A balance sheet reports on ______.

Assets and equities at a point in time

Reviewing and evaluating the information used to prepare a company's financial statements is the purpose of _____

Auditing

Reviewing and evaluating the information used to prepare a company's financial statements is the purpose of ______

Auditing

Earnings per share can be either ______ earnings per share or diluted earnings per share

Basic

Earnings per share can be either ______ earnings per share or diluted earnings per share.

Basic

If an individual passes a rigorous examination established by the AICPA and meets a state's educational and experience requirements, they can be recognized as a(n) ______.

CPA

Earnings per share is profit earned by a company for each share of outstanding ____ stock.

Common

Earnings per share is profit earned by a company for each share of outstanding _____ stock.

Common

An accountant who passes a series of examinations established by the American Institute of Certified Public Accountants (AICPA) and meets the state's requirement for education and experience is recognized as a certified ______ accountant

Public

Sales are one type of _____ that results from selling products to customers.

Revenue

Net income or loss is the difference between ______.

Revenues - Expenses

How do cash flow problems usually start?

The firm uses up its credit.

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

income

By its very design, the ______ offers one of the clearest possible pictures of the company's overall revenues and the costs incurred in generating those revenues.

income statement

The ratio that measures the speed with which inventory moves through the firm and gets converted into sales is called the ______.

inventory turnover ratio

Which ratio is the cost of goods sold divided by the average inventory?

inventory turnover ratio

The formula for the costs of goods sold is ______.

purchase price + freight charges + storage costs

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

ratepayers; taxpayers

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

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

ratio analysis

The Arthur Andersen firm was convicted of obstruction of justice for its actions in the Enron case. This conviction was _____

reversed by the U.S. Supreme Court

The Arthur Andersen firm was convicted of obstruction of justice for its actions in the Enron case. This conviction was ______.

reversed by the U.S. Supreme Court

The role of an auditor is to ______

review and evaluate a company's financial information

In the process of selling goods or services, a business incurs operating expenses such as ______

salaries utilities rent

Where is accounting data first entered?

journal

____ ratios measure how effectively a firm is using its various resources to achieve profits.

profitability

In a statement of cash flows, investments refers to ______

cash used in or provided by the firm's investment activities

The bottom line is another name for ______.

net income or loss

The difference between revenue and costs is called ______.

net income or loss

What are the three major categories on the balance sheet?

assets, liabilities, owner's equity

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

auditing

A _______ balance is a summary of all financial data in the ledgers which ensures the figures are correct and balanced.

Trial

Gross profit is ______.

net sales minus cost of goods sold

Financial data from transaction documents are first recorded in a(n) ____. The data are then transferred into categories in a(n) _____, so managers can find all the information about a single account in one place.

Blank 1: journal Blank 2: ledger

Which financial statement reports the firm's financial operations over a particular period of time, usually a year, a quarter of a year, or a month?

Income statement

The major activities of a firm shown on the statement of cash flows include operations, ____, and financing

Investments

A ____ balance is a summary of all financial data in the ledgers which ensures the figures are correct and balanced

Trial

Which are steps in the accounting cycle?

analyze transactions prepare a trial balance record transaction in the journal

The financial statement that reports a firm's financial condition at a specific time is the ______.

balance sheet

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

financial statements

Owners, creditors, and suppliers will be most interested in which type of accounting report?

financial statements

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

income statement

Which financial statement's purpose is to reveal whether a business is earning a profit or losing money?

income statement

In a statement of cash flows, what two activities of the firm relate to cash used in or provided by the firm's investment activities?

investments sale of plant assets

Financial transactions are first recorded in the ______ and then transferred, or posted to the ______.

journal to the ledger

The value of what stockholders own in a firm minus any liabilities is called ______.

owner's equity

Which are steps in the accounting cycle?

record transaction in the journal prepare a trial balance analyze transactions

Which of the following provides a summary of money coming into and going out of the firm that tracks a company's cash receipts and payments?

statement of cash flows

Which report provides a summary of money coming into and going out of the firm?

statement of cash flows

A journal is the place where:

transactions are first recorded

What step in the accounting cycle refers to a summary of all financial data to make certain the figures are correct and balanced?

trial balance