WPC 150: Accounting Smartbook
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
What type of accountant is most likely to develop strategies for a firm in dealing with the Internal Revenue Service?
tax accountant
Government and nonprofit accounting involves working for organizations whose purpose is to serve ______. (Select all that apply)
taxpayers ratepayers
The primary users of government and nonprofit accounting information are ______. (Select all that apply)
taxpayers special interest groups legislative bodies
Users of managerial accounting information include ______. (Select all that apply)
the Chief Financial Officer department managers
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
In using the accounting equation, if assets = $40,000 and liabilities = $30,000, then owner's equity is equal to ______.
$10,000
_____ accounting generates financial information for people outside the firm, while _____ accounting generates financial information for people inside the firm.
Financial managerial
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 are some benefits of using computers for accounting purposes?
Information can be posted from journals instantaneously. It frees accountants' time for more important tasks. Software can help if no strong accounting support is available.
_____ ratios measure a company's ability to turn assets into cash to pay its short-term debt.
Liquidity
_____ income after taxes is the last line on the income statement.
Net
_____ ratios measure how effectively a firm is using its various resources to achieve profits.
Profitability
What are four main types of financial ratios used in ratio analysis?
Profitability ratios Activity ratios Debt ratios Liquidity ratios
How do cash flow problems usually start?
The firm uses up its credit.
True or false: Profitability ratios measure how effectively a firm's managers are using its various resources to achieve profits.
True
True or false: The Financial Accounting Standards Board defines the generally accepted accounting principles that accountants must follow.
True
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
Recording, classifying, summarizing, and interpreting financial events in an organization is referred to as ______.
accounting
The method used to record and summarize accounting data into reports is called a(n) _____ system.
accounting
The relationship among assets, liabilities, and owners' equity is a fundamental concept in accounting known as the _______ equation.
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
What are retained earnings?
accumulated earnings not paid out to stockholders
The ratios that measure the effectiveness of a firm's management in turning over inventory are called ______.
activity ratios
Net income is ______.
all revenue minus all expenses and taxes
The first step in the accounting cycle is to ______.
analyze source documents
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
The _____ _____ is the yearly statement of the firm's financial condition, progress, and expectations provided to stakeholders.
annual report
Which three components make up the fundamental accounting equation?
assets owners' equity liabilities
The information and analysis that comes from managerial accounting is used to ______.
assist managers inside the organization with their decision making
Reviewing and evaluating of records used to prepare a company's financial statements is referred to as _____.
auditing
Reviewing and evaluating records used to prepare a company's financial statements is referred to as ______.
auditing
The key working areas of accounting include managerial accounting, financial accounting, tax accounting, government and nonprofit accounting, and _____.
auditing
Which are considered to be the working areas of accounting? (Select all that apply)
auditing managerial accounting government and not-for-profit accounting tax accounting financial accounting
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
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
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
The _____ of _____ _____ measures the cost of merchandise the firm sells or the materials and supplies used to manufacture them for sale.
cost goods sold
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
The purpose of the Financial Accounting Standards Board is to ______.
define generally accepted accounting principles
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
The best way to understand a firm's financial health and stability is to look at its ______.
financial statements
The _____ statement summarizes profit (or loss), costs, and expenses over a specific period, which may be a week, a month, or a year.
income
Managerial accounting is used to provide information ______.
inside the firm
On a balance sheet, assets may include ______. (Select all that apply)
intangible resources goodwill tangible resources
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
What are the three major categories on the balance sheet?
liabilities owners' equity assets
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
Rent, salaries, supplies, utilities, and insurance are examples of _____ expenses that are general expenses.
operating
The statement of cash flows reports cash receipts and disbursements related to _____ , investments, and financing.
operations
The value of what stockholders own in a firm minus any liabilities is called ______.
owners' equity
What is the difference between assets and liabilities?
owners' equity
Financial accounting and managerial accounting differ in terms of who uses the information. Financial accounting provides information primarily for ______.
people outside the organization
Jayleen works for her firm preparing and analyzing its financial statements. She would be called a(n) ______ accountant.
private
A business that does not need a full-time accountant, would most likely use a ______ accountant in which services are exchanged for a fee.
public
Which type of accountant would be available to businesses or individuals on a fee basis?
public accountant
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
An accounting system is used to ______.
record and summarize accounting data into reports
Which are steps in the accounting cycle? (Select all that apply)
record transaction in the journal analyze transactions prepare a trial balance
Operating expenses include which of the following?
rent utilities supplies
Accumulated earnings from the firm's profitable operations that are kept in the business and not paid out to stockholders in distributions of company profits are called _____ earnings
retained
Accumulated earnings from the firm's profitable operations that are kept in the business and not paid out to stockholders in distributions of company profits are called _____ earnings.
retained
The accumulated earnings from a company's profits that are reinvested into the business and not paid out to stockholders are called ______.
retained earnings
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
The monetary value of what a firm received for goods sold, services rendered, and other payments is termed _____.
revenue
What is the term for all resources that come into the firm from operating activities?
revenue
Cash flow analysis is especially important for which of the following?
small businesses
An advantage of the use of computers to maintain and compile accounting information is ______.
speed
Cash receipts and disbursements related to operations, investments, and financing are reported on the ______.
statement of cash flows
_____ ratios tell us how effectively management is turning over inventory.
Activity
The _____ _____ provides information about a company's financial status to company managers, owners, government agencies, and the general public.
Annual Report
_____ are economic resources owned by a firm.
Assets
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
True or false: Gross profit is what a company shows on their income statement as the bottom line figure.
False