Chapter 14 SB

The cost incurred in the day-to-day operations of an organization is known as ______.

expenses

The costs incurred in the day-to-day operations of an organization are called _____.

expenses

Like its name suggests, double-entry bookkeeping requires that business transactions be recorded in separate accounts.

two

The process of spreading the cost of a tangible asset over its estimated useful life is referred to as ______.

depreciation

Forensic accountants act much like ______.

detectives

Which of the following is a liability of Eggs4U, an online free-range egg supply company?

Money owed for purchased chicken feed

True or false: Each share of stock in a corporation represents a claim on the organization.

True

Cost of goods sold is calculated by using ______.

beginning inventory, interim purchases, and ending inventory

A(n) _____ is an internal financial plan that forecasts income and expenses of the organization for a set period of time.

budget

Owners' equity ______.

can come from past profitable operations or from money investors have given the firm

An individual who has been certified by the state in which he or she practices and has the right to express, officially, an unbiased opinion regarding accuracy of a client's financial statements works as a(n) _____.

certified public accountant

The amount of money a firm spent to buy or produce the products it sold during the period to which the income statement applies is ______.

cost of goods sold

Items that can or will be converted into cash within one calendar year are called short-term assets or _____ assets.

current

_____ liabilities must be repaid within one year.

current

Assets that can or will be converted into cash within one year are termed ______.

current assets

Owners' _____ includes all the money that has ever been contributed to a company that never has to be repaid.

equity

The first step in the accounting cycle is to ______.

examine source documents

The accounting specialty that analyzes financial documents in search of fraudulent entries or financial misconduct and, therefore, is fit for legal review is ______ accounting.

forensic

The accounting cycle is most known as being a _____-step process.

four

There are more than 75,000 certified _____ examiners across the United States who work to root out evidence of "cooked books" in firms.

fraud

Depreciation is considered a type of ______.

general & administrative expense

Which report summarizes an organization's profitability over a specific period, which may be a week, a month, or a year.

income statement

A(n) _____ is a time-ordered list of account transactions.

journal

After source documents are examined, each financial transaction is recorded in a _____.

journal

Debts that a firm owes to others are called _____.

liabilities

All assets on a balance sheet are listed in descending order of _____.

liquidity

The goal of double-entry bookkeeping is to ______.

maintain the balance of the accounting equation

The internal use of accounting statements by managers in planning and directing the organization's activities is known as _____ accounting.

managerial

The internal use of accounting statements by managers in planning and directing the organization's activities is referred to as ______.

managerial accounting

If an accountant were to take a firm's total revenue and deduct all expenses (including taxes), the result would be ______.

net income (or loss)

Cash from ______ activities is calculated by combining the changes in the revenue accounts, expense accounts, current asset accounts, and current liability accounts.

operating

Which two terms are synonymous with the term "income st

operating statement P&L statement

An accountant that is employed by a large corporation, government agency, or other organization to prepare and analyze their financial statements would be called a(n) ______ accountant.

private

Revenue minus the cost of goods sold is called gross ______ or ______. (Select two answers)

profit income

Step two of the accounting cycle is ______.

recording transactions

The first step of the accounting cycle is to examine _____ documents, like checks, credit card receipts, and other evidence concerning specific transactions.

source

The ______ explains how the company's cash changed from the beginning of the accounting period to the end.

statement of cash flows

The balance sheet takes its name from its reliance on ______.

the accounting equation

The definition of accounts payable is ____.

the amount a company owes to suppliers for goods and services purchased with credit

Select from the following all the ways that managers and business owners use financial statements. (Select all that apply)

to assist in reporting to the IRS for reporting information to employees to aid in internal planning & control

Select from the following the two formats of balance sheets.

traditional vertical

The _____ format balance sheet is newer and gaining wide acceptance. It shows assets on the top followed by liabilities and owners' equity.

vertical

accouting cycle

1. Examine Source Documents 2. Record Transactions 3. Post Transactions 4. Prepare Financial Statements

Which of the following is the main distinguishing factor between accountants and bookkeepers?

Accountants analyze and interpret financial information and bookkeepers do not.

Which of the following is an accurate statement regarding the role of an accountant?

Accounting usually requires coursework beyond a college accounting degree.

_____ is an intangible asset that often includes an organization's reputation.

Goodwill

Financial statements prepared by accountants would be used by which of the following stakeholders of a business? (Select all that apply)

Managers Government agencies Investors Creditors

Economic resources owned by a firm are called _____.

assets

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

balance sheet

Generally, accountants divide profits into individual sections such as (select all that apply)

Operating income Earnings before taxes and interest

Which of the following would most likely include a title of controller or internal auditor?

Private accountant

_______ is/are the total amount of money received (or promised) from the sale of goods or services, as well as from other business activities such as the rental of property and investments.

Revenue

Cash from operating activities is calculated by combining the changes in which four accounts?

Revenue accounts Expense accounts Current liability accounts Current asset accounts

______ refers to how fast an asset can be converted into cash.

Liquidity

True or false: People both inside as well as outside of an organization use accounting tools to evaluate organizational operations.

True

Of utmost importance to management is/are _____, which is the movement of money through a firm on a daily, weekly, monthly, or yearly basis.

cash flow

The major activities of a firm, as shown on the statement of cash flows, include all of the following EXCEPT ______.

cash from taxes

A private accountant that has passed a rigorous examination by the Institute of Management Accountants may become certified as a(n) ______.

certified management accountant (CMA)

Gross income or profit equals revenues minus the ______ required to generate the revenue.

cost of goods sold

Select the three terms that are equivalent to the term operating income.

operating profit Earnings before interest and taxes Income before interest and taxes

All of the money that has been contributed to a firm that never has to be paid back is called ______.

owner's equity

Owners' contributions to the organization in combination with income earned and retained to grow and develop the firm are called ______.

owner's equity

Forensic accountants would most likely become certified as ______.

certified fraud examiners

Which of the following is considered the most important component of an annual report?

CPA's signature

_____ is the movement of money through an organization over a daily, weekly, monthly, or even yearly basis.

Cash flow

Which of the following must be repaid within 1 year?

Current liabilities

True or false: CPAs pass and obtain their certification through the federal government.

False

True or false: Organizational budgets are always prepared on a monthly basis.

False

External statements that managers in an organization may prepare are used for which of the following? (select all that apply)

Filing income taxes Preparing the annual report Reporting results to stockholders Obtaining credit from lenders

Which report summarizes an organization's profitability over a specific period, which may be a week, a month, or a year?

Income statement

What does it mean to say that an annual report has been audited?

It bears the signature of a CPA attesting that the document is an accurate reflection of the financial condition of the firm.

Which of the following is NOT a characteristic of a balance sheet?

It states that liabilities must equal owners' equity.

In different types of businesses as well as different countries, different accounting terms may be used for the same concept. For example, revenue is equivalent to which of the following terms? (pick two answers)

Sales Goods or services sold

Organizations evaluate their operations through the recording, measurement, and interpretation of financial information. This process is known as _______.

accounting

Amounts owed to suppliers for goods and services purchased with credit are called ____.

accounts payable

This is an account representing all unpaid financial obligations incurred by the organization.

accrued expenses

Accrued expenses represent ______.

all unpaid financial obligations of a firm

Accounting data is first entered in a(n) ______.

journal

Gross income and gross earnings are two equivalent terms for gross _____.

profit

Revenue is defined as ______.

sales plus other money coming into the firm