Understanding accounting and financial information
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 is considered to be the "language of business"?
Accounting
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 it'd bills, and how much debt it owes will look at the firms
Annual report
Which three components make up the fundamental accounting equation
Assets Liabilities Owners equity
A(n) __________ ________ reports the firms financial condition on a specific date
Balance sheet
The financial statement that reports a firms financial condition at a specific time is the
Balance sheet
Leverage or Debt Ratios measure the degree to which a firms relies on
Borrowed funds
If an individual passes a rigorous examination established by the AICPA and meets a states educational and experience requirements, they can be recognized as a
CPA
Which three activities are part of the function of accounting
Classifying financial transactions Interpreting financial transactions Recording financial transactions
The purpose of the financial accounting standards board is to
Define generally accepted accounting principles
______________ accounting generates financial information for people outside the firm, while ____________ accounting generates financial information for people inside the firm
Financial, managerial
What are the three major activities of a firms shown on the statement of cash flows?
Financing Operations Investments
What type of assets are land, labor, buildings, and equipment?
Fixed assets
The principals defined by FASB, that accountants must follow to assure that a firms accounting information is accurate are abbreviated as
GAAP
The __________ statement reports a firms financial operations over a particular period of time, usually a year, a quarter of a year, or a month
Income
Which financial statement reports the firms financial operations over a particular period of time, usually a year, a quarter of a year, or a month
Income statement
Which financial statement shows a firms bottom line it's profit or loss after costs expenses and taxes for a specific period
Income statement
The major activities of a firm shown on the statement of cash flows include operations ____________ and financing
Investments
______________ratios measure the degree to which a firm relies on borrowed funds in its operations
Leverage
The current ratio is an example of a ___________ ratio that measures a company's ability to turn assets into cash to pay its short-term debts
Liquidity
______________Ratios measure a company's ability to turn assets into cash to pay its short-term debt
Liquidity
A CPA must
Pass a series of exams Meet à states requirements for education and experience
What are the four main types of financial ratios used in ratio analysis
Profitability ratios Liquidity ratios Debt ratios Activity ratios
an accountant who passes a series of examinations established by the American institute of certified public accountants ACIPA and meets the state's requirements for education and experience is recognized as a certified ________ accountant
Public
Which are steps in the accounting cycle
Record transaction in the journal Prepare a trial balance Analyze transactions
Which three activities are part of the function of accounting
Recording financial transactions Classifying financial transactions Interpreting financial transactions
The monetary value of what a firms received for goods sold, services rendered, and other payments is termed
Revenue
operating expenses include which of the following
Supplies Rent Utilities
Stockholders, or owners equity represents
The value of the business that belongs to owners
True or false: Profitability ratios measure how effectively a firms managers are using its various resources to achieve profits
True
The income statement shows
a firm's profit (or loss) after costs, expenses, and taxes
The relationship among assets, liabilities, and owners equity is a fundamental concept in accounting known as the _________ equation
accounting
recording, classifying, summarizing, and interpreting financial events in an organization is referred to as
accounting
Net income is
all revenue minus all expenses and taxes
The __________ ________ is the yearly statement of the firms financial condition, progress and expectations provided to stakeholders
annual report
Items of value owned by a firm are called
assets
_________ are economic resources owned by a firm
assets
The fundamental accounting equation is the basis for the
balance sheet
The ______________ line is another name for net income after taxes
bottom
examples of fixed assets include
buildings and equipment
The ability to read, understand, and analyze accounting reports and financial statements is critical in understanding
business operations
The statement of cash flows is a financial statement that shows
cash receipts and disbursements
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
Assets that can or will be converted into cash within one year are termed ______.
current assets
In accounting, liabilities refer to
debts a business owes to others
Because they indicate a firms financial health and stability, the use of __________ are key factors in management decision making
financial statements
The best way to understand a firms financial health and stability is to look at its
financial statements
The debt a firm owes to others is called a(n) ______.
liability
_____________ income after taxes is the last line on the income statement
net
The bottom line is another name for
net income or loss
In operating a business, rent, salaries, supplies, utilities and insurance are all examples of
operating expenses
The value of what stockholders own in a firm minus any liabilities is called
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
What type of ratios measure how effectively a firm is using its various resources to achieve profits?
profitability
The formula for the costs of goods sold is
purchase price + freight charges + storage costs
The assessment of a firms financial condition and performance through calculations and interpretation of financial ratios developed from the firms financial statements is called __________ analysis
ratio
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
________ is the monetary value of what a company received for goods sold, services rendered, and all other payments to the firm
revenue
cash receipts and disbursements related to operations, investments, and financing are reported on the
statement of cash flows
Return of equity is net income minus taxes divided by
total owners' equity