Accounting Chapter 7
Managerial Accounting
The area of accounting that focuses on reporting information to internal users
Financial Accounting
The area of accounting which focuses on reporting information to external users
Ratio Analysis
The calculation and interpretation of a financial ratio
Return on Sales (ROS)
The ratio of net income to total sales
Calculation for Total Expenses Ratio
Total Expenses / Total Sales= Total Expenses Ratio
Calculation for Net Income
Total Revenue-Total Expenses=Net Income
How to find Current Capital with Net Loss
Capital account balance- Net loss- Drawing account balance = current capital
Four Sections of the Balance Sheet
-Heading -Assets -Liabilities -Owner's Equity
Pay Yourself First
A budgeting strategy of setting aside at least 10% of after-tax income for saving and investing
Financial Ratio
A comparison between two components of financial information
Budget
A financial road map used by individuals and companies as a guide for spending and saving
Deficit
A negative balance that remains after total expenses are subtracted from total income
Surplus
A positive balance that remains after total expenses are subtracted from total income
Stakeholders
Any person or groups who will be affected by an action
How to find Current Capital with Net Income
Capital account balance + Net income - Drawing account balance = current capital
Calculation for Net Income Ratio
Net Income / Total Sales= Net Income Ratio
Vertical Analysis
Reporting an amount on a financial statement as a percentage of another item on the same financial statement
