Accounting Exam 1

Transaction

Accountants refer to an economic event as a

Liabilities

Accounts payable,

Two major parts of SE

Common stock and retained earnings

Stockholders' Equity

Common stock, revenue, expenses, dividends

Financial

External, quarterly/annually, general-purpose, GAAP, independently reviewed by CPA

GAAP

Generally Accepted Accounting Principles

Which one of the following is not considered a raw material cost?

Partially completed motor engines for a motorcycle factory

Expenses

The cost of assets consumed or services used in the process of generating revenues.

Owners enjoy limited liability in a

corporation

Manufacturing costs include

direct materials, direct labor, manufacturing overhead

Product Costs

direct materials, direct labor, manufacturing overhead

Dividends

distributions of cash or other assets to stockholders

Operating Activities

everyday

Two general uses of accounting data

external and internal

Accounting

financial information system that allows users to understand what is happening in an organization

Notes Payable

liability

Direct labor

the work of factory employees that can be physically and directly associated with converting raw materials into finished goods

Managerial accounting is applicable to

-service entities -manufacturing entities -not-for-profit entities

Proprietorship

A business owned by one person, usually small

Main part of the recording of economic event

Bookkeeping

External

Outside company who wants financial information about company

Record economic event

Provides history of its financial activities. Consists of keeping systematic, chronological diary of events.

Balance sheet

Reports on the assets, liabilities, and stockholders' equity of the business as of a specific date.

Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?

The appointment of a new CPA firm to perform an audit

Economic event

The transfer of control of an economic resource from one party to another party.

Corporation

Treated as a separate entity to owners, large, stockholder's enjoy limited liability

Internal users include human resources managers.

True

The accounting process includes the bookkeeping function.

True

The two most common types of external users are investors and creditors.

True

The three steps in the accounting process

identification, recording, communication

A manufacturing process requires small amounts of glue. The glue used in the production process is classified as a(n)

indirect material

Is the company a good investment?

investor

Salaries and Wages Payable

liability

Investment activities

long term

Managerial accounting is also called

management accounting

Planning

managers need to look ahead and establish objectives (Add value= key objective)

Amounts owed to bank

note payable

Which one of the following is not a cost element in manufacturing a product?

office salaries

Liabilities

outside claims against assets or debts/obligations

A proprietorship is a business

owned by one person

3 major management functions

planning, directing, controlling

Management accountants would not

prepare reports primarily for external users.

Income statement

presents the revenues and expenses and resulting net income or net loss for a specific period of time

Controlling

process of keeping the company's activities on track

Financial Accounting

provides economic and financial information for investors, creditors, and other external users

Managerial Accounting

provides internal reports to help users make decisions about their companies

Direct Materials

raw materials that can be directly associated with finished product

Is the company operating within prescribed guidelines?

regulatory agency

Assets

resources owned by a business

Financing activities

short term

Dividends

stockholders equity

Statement of Cash Flows

summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time

Retained Earnings Statement

summarizes the changes in retained earnings for a specific period of time

Revenues

the increase in assets or decrease in liabilities resulting from the sale of goods or the performance of services in the normal course of business

Common stock

total amount paid in by stockholders for the shares they purchase

Partnership

a business owned by two or more people, vary in size

Transactions

a business's economic events

Communicate economic event

accountants communicate findings via accounting report (most common report)

Language of business

accounting

Amounts owed to suppliers for goods and services purchased

accounts payable

Amounts due from customers

accounts receivable

Buildings

asset

Supplies

asset

Raw materials

basic materials and parts used in the manufacturing process

Retained earnings

combination of changes in revenue, expenses, and dividends

Directing

coordinating a company's diverse activities and human resources efficiently

Which of the following is not a manufacturing cost category?

costs of goods sold

Is the company able to pay its debts?

creditor

party to whom money is owed

creditor

Order of Equity

Cash, accounts receivable, supplies, equipment

Assets

Cash, accounts receivable, supplies, equipment, inventory

Period costs

Costs that are matched with the revenue of a specific time period and charged to expense as incurred.

Accounting information is used only by external users with a financial interest in a business enterprise.

False

Managerial accounting provides reports to help investors and creditors evaluate a company.

False

The three steps in the accounting process are identification, recording, and examination.

False

Internal

Inside company that wants accounting information to plan, organize, and run business.

Is the company complying with tax laws?

Internal revenue service

Managerial

Internal, frequently as needed, special purpose, detailed, any relevant data

Manufacturing Overhead

Manufacturing costs that are indirectly associated with the manufacture of the finished product.

Investors

Use accounting information to decide what they want to buy, sell, or hold ownership under

Creditors

Use accounting information to evaluate risk in lending money/granting credit