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
