Introduction to Business

A statement of ________________ ___________________ provides a summary of money coming into and going out of the firm

Cash flows

Operating expenses include which of the following?

Rent Utilities Supplies

The accumulated earnings a company's profits that are reinvested into the business and not paid out to stockholders are called?

Retained earnings (RE)

The three profitability performance ratios are?

Return on equity Earnings per share Return on sales

On a Balance Sheet, assets may include?

Tangible & Intangible resources

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

Tax

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

Tax accountant

How do cash flow problems usually start?

The firm uses up its credit

In the process of selling goods and services, a business incurs operating expenses such as?

Utilities Salaries Rent

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

Which of the following are considered users of managerial accounting information?

- The Chief Financial Officer - Department managers

Common financial transactions include?

- buying and selling goods - acquiring insurance - paying employees

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

What identifies the investment of the sole proprietor in businesses that are not incorporated?

A capital account

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

Accounting Information

Which of the following are inputs to the accounting system?

shipping documents sales documents

Which of the following are considered disciplines within the accounting profession?

tax accounting managerial accounting financial accounting

Businesses that are not incorporated identify the investment of the sole proprietor through the _________________ account

Capital

Which of the following has the highest liquidity?

Current assets

The purpose of the FASB is to?

Define the GAAP

A(n) __________________ is a record book or computer program where accounting data are first entered

Journal

Which of the following are the major categories on the balance sheet?

Liabilities, Owner's equity, and Assets

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

Liability

A CPA must?

Pass a series of exams Meet a state's requirements for education and experience

An accounting system includes inputs, _________________, and outputs

Processing

_________________ ratios measure how effectively a firm is using its various resources to achieve profit

Profitability

__________________ ratios measure how effectively a firm is using the various resources to achieve profits

Profitability

What is the primary report given to the IRS by an organization?

Tax return

The method used to record and summarize accounting data into reports is called a(n)?

accounting system

On the statement of cash flows activities from operations include?

Cash transactions associated with running the business

Which of the following is considered to be a part of accounting?

Classifying, Recording, and Interpreting financial transactions

_______________ is the systematic write-off of a tangible asset over its estimated useful life

Depreciation

The Sarbanes-Oxley Act created the Public Company Accounting ___________________ Board

Oversight

The primary purpose of the Sarbanes-Oxley Act is one of?

Oversight

What is the difference between assets and liabilities?

Owners' equity

Not-for-profit organizations need accounting professionals to?

Show that their funds are well-managed Show donors that money is spent for the designated cause Show that money is being spent properly

Arthur Anderson was convicted of?

obstruction of justice

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

The Sarbanes-Oxley Act prohibits accounting firms from providing consulting services to companies they?

Audit

Examples of profitability ratios include?

Basic earnings per share Return on sales Return on equity

The _______________ line is another name for net income after taxes

Bottom

Examples of fixed assets include?

Buildings and equipment

Accounting reports and __________________ ________________ are critical to understanding the health of a business

Financial Statements

Managerial accounting is concerned with?

Measuring production costs Preparing budgets Controlling

A certified public accountant?

Must follow GAAP in the United States Must pass a series of exams

Return on sales is?

Net income divided by net sales

The difference between revenue and costs is called?

Net income or loss

Of the three major activities of a firm, cash raised from the issuance of new debt is known as?

financing

A liability that can be short-term or long-term that a business promises to repay by a certain date is called a(n)?

notes payable

The statement of cash flows reports cash receipts and disbursements related to _________________, investments, and financing

operations

Which types of assets are land, buildings, and equipment?

Fixed assets

A current ratio of 2 means that the business has $2 of current assets for every?

$1 of current liabilities

__________________ is the reviewing and evaluating of records used to prepare a company's financial statements

auditing

Leverage or debt measure the degree to which a firm relies on?

Borrowed funds

The purposes of auditing include?

Examining the financial health of an organization Reviewing records Looking into operational effectiveness and efficiency

What type of information is reported by accounting to stakeholders?

Financial

A company that uses a capital account for owners equity is organized as a _________________ _________________ or a partnership

Sole proprietorship

Return on equity is net income minus taxes divided by?

Total owners' equity

How many entries are required for each transaction in the ledgers?

Two

Major economic scandals in the early 2000s involved companies such as?

Tyco WorldCom Enron

The _______________ _____________________ summarizes all the revenue from operating activities, money resources used up, expenses, and resources left after all costs and expenses

income statement

The _________________ ________________ summarizes revenues, costs, and expenses over a specific period, which may be a week, a month, or a year

income statement

Match the term to the correct phrase

Accounting: Classifying, summarizing, interpreting, and reporting Bookkeeping: Recording Accounting cycle: Series of six steps Trial Balance: Summary of data in legers

__________________ payable are current liabilities involving money owed to others but not yet paid

Accounts

A trial balance is a summary of all financial data in the ledgers which ensures the figures are correct and?

balanced

The current ratio is the ratio of current assets to current liabilities, whereas the acid-test ratio is the ratio of _____________________, accounts receivable, and marketable securities to current liabilities

cash

The basic earnings per share ratio helps determine the amount of profit a company earned for each share of outstanding?

common stock

Not-for-profit organizations need accountants to show __________________ that their funds are being spent properly

donors

Management decision making is based on a firm's financial health and stability which are shown on the?

financial statements

Government and non-for-profit 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?

ratio analysis

Sales are one type of ________________ that results from selling products to customers

revenue

What are some benefits of using computers for accounting purposes?

- Information can be posted from journals instantaneously - Computers can handle large amounts of financial information - Software can help if no strong accounting support is available

Ratios used to measure the effectiveness of management in utilizing the assets that are available are called?

Activity ratios

In order to be a certified management accountant a person must?

1. pass a qualifying exam 2. meet the educational requirement 3. be certified by the Institute of Certified Management Accountants

What are advantages of using computers to maintain and compile accounting information?

1.Handle large amounts of data 2. Speed

__________________ assets are items that can or will be converted into cash within one year

Current

What type of long-term assets have no real physical form but do have value?

Intangible assets

Revenue is the monetary value of what a firm received for?

Interest earned Services rendered Goods sold

The key working areas of accounting include?

Managerial accounting, Financial accounting, auditing, tax accounting, and governmental and not-for-profit accounting

___________________ accounting deals with information within the firm, whereas _____________________ accounting provides information outside the firm

Managerial; financial

On the statement of cash flows financing activities would include?

Paying past debt Paying dividends Taking on new debt

The Sarbanes-Oxley Act?

Requires CEOs to certify the accuracy of financial reports Strengthens the protection of whistleblowers Prohibits accounting firms from providing consulting services to companies they audit

Select all that are true

Revenue may include rent received and interest earned For most firms, most revenue comes from sales

Which are advantages of using computers to maintain and compile accounting information is?

Speed

The Financial Accounting _______________ ________________ defines the generally accepted accounting principles

Standards Board

The three major activities of operations, investments, and financing are included on which financial statement?

Statement of cash flows

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 ratio is the cost of goods sold divided by the average inventory?

The inventory turnover ratio

Stakeholders who want to look at detailed financial information on the financial condition, progress, and expectations of a company will look at?

an annual report

The financial statement that reports a firm's financial condition at a specific time is the?

balance sheet

The __________________ ___________________ reports a firm's financial condition on a specific data, whereas the ____________________ _________________ summarizes revenues, costs, and expenses for a specific period

balance sheet; income statement

The __________________ of ___________________ ____________________ measures the cost of merchandise the firm sells or the materials and supplies used to manufacture them for sale

cost of goods sold

Revenue minus cost of goods sold is called?

gross profit

_________________ are cash used in or provided by the firm's investment activities

investments

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

journal; ledger

Transactions that are entered in the journal are then posted to specific categories in a(n)?

ledger

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

$10,000

Managers inside the organization are most likely to use _________________ accounting

Managerial

Net income is?

All revenue minus all expenses and taxes

What is an evaluation and unbiased opinion about the accuracy of a company's financial statements?

An independent audit

What is the meaning of accounts payable?

Current liabilities involving money owed to others but not yet paid for

The systematic write-off of the cost of an asset to expense over its useful life is called?

Deprecation

Earnings per share can be either basic earnings per share or __________________ earnings per share

Diluted

Net income after taxes divided by the number of common stock shares outstanding is called?

Earnings per share or "EPS"

Return on sales is net ______________ divided by net sales

Income

Return on sales is net ________________ divided by net sales

Income

___________________ refers to how fast an asset can be converted into cash

Liquidity

What is the meaning of bonds payable?

Long-term liabilities that represent money lent to the firm that must be paid back

Which of the following are stakeholders of a business?

Management Employees Supplier

Accounting is needed for ___________________ organizations as well as for profit-seeking firms

Non-profit

Which of the following would be shown on an income statement?

Operating expenses Net income Revenue

Diluted earnings per share measures profit per share of outstanding common stock, but also takes into consideration which of the following?

Stock options, preferred stock, warrants, convertible debt securities