Chapter 17

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

cash receipts and disbursements

What is another name for debts?

liabilities

Which three components make up the fundamental accounting equation?

liabilities; owners' equity; assets

The statement of cash flows reports cash receipts and disbursements related to

operations

The major categories of the balance sheet are assets, liabilities, and ______.

owner's equity

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

owner's equity

Jayleen works for her firm preparing and analyzing its financial statements. She would be called a(n) ______ accountant.

private

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

revenue

The role of an auditor is to:

review and evaluate a company's financial information

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

special interest groups taxpayers legislative bodies

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

tax accountant

The first step in the accounting cycle is to ______.

Analyze source documents

ratios measure the degree to which a firm relies on borrowed funds in its operations.

Leverage or Debt

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

accounting

The principles, defined by FASB, that accountants must follow to assure that a firm's accounting information is accurate are abbreviated as ______.

GAAP

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

What term describes the cost of merchandise the firm sells?

cost of goods sold

The purpose of the Financial Accounting Standards Board is to ______.

define generally accepted accounting principles

Users of managerial accounting information include:

department managers the Chief Financial Officer

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

financial statement

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

financial statements

On a balance sheet, assets may include Blank______.

goodwill intangible resources tangible resources

Which are considered to be the working areas of accounting?

government and not-for-profit accounting managerial accounting tax accounting financial accounting auditing

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

liquidity ratio

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

operating expenses

What is the term for all resources that come into the firm from operating activities?

revenue

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

Activity ratios Liquidity ratios Debt ratios Profitability ratios

Net income or loss is:

all revenue minus all expenses and taxes

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 used to provide information ______.

inside the firm

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

liability

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

return on equity

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

$10,000

True or false: Financial accounting provides information to people inside of an organization, whereas managerial accounting provides information to people outside of an organization.

False

The income statement shows:

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

Which type of accountant would be available to businesses or individuals on a fee basis?

public accountant

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

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

ratio analysis

Stockholders, or owners' equity represents ______.

the value of the business that belongs to owners

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

total owners' equity

True or false: Profitability ratios measure how effectively a firm's managers are using its various resources to achieve profits.

True

What are the three major categories on the balance sheet?

assets, liabilities, owner's equity

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

assist managers inside the organization with their decision making

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

auditing

What type of ratios measure how effectively a firm is using its various resources to achieve profits?

profitability

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

speed

List the steps in the accounting cycle from beginning to end.

Analyze source documents Record transactions in journals Transfer journal entries to a ledger Take a trial balance Prepare financial statements Analyze 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

True or false: The Financial Accounting Standards Board defines the generally accepted accounting principles that accountants must follow.

True

are economic resources owned by a firm.

Assets

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

Cash flow problems

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

False

What are some benefits of using computers for accounting purposes?

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

income after taxes is the last line on the income statement.

Net

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

Return on equity

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

Tax

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

Tax

How do cash flow problems usually start?

The firm uses up its credit.

What is an annual report?

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

Recording, classifying, summarizing, and interpreting financial events in an organization is referred to as ______.

accounting

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

If financial management is the heartbeat of competitive businesses, what keeps that heartbeat stable?

accounting information

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

Which are steps in the accounting cycle?

analyze transactions prepare a trial balance record transaction in the journal

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

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

auditing

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

borrowed funds

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

business operations

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

people outside the organization

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

statement of cash flows

Operating expenses include which of the following?

rent supplies utilities

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

activity ratios

ratio that measures a company's ability to turn assets into cash to pay its short-term debts.

liquidity