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