BUSINESS TEST

In operating a business, rent, salaries, supplies, utilities and insurance are all examples of ______.

operating expenses

The purpose of the Financial Accounting Standards Board is to ______.

define generally accepted accounting principles

statement of cash flows

provides a summary of money coming into and going out of the firm, tracks the company's cash receipts and cash payments.

balance sheet

reports the firm's financial condition on a specific date

EPS

earnings per share

An advantage of the use of computers to maintain and compile accounting information is

speed

return on sales

tells us whether the firm is doing as well as its competitors in generating income from sales

retained earnings

the accumulated earnings from a firm's profitable operations that were reinvested in the business and not paid out to stockholders in dividends

ratio analysis

the assessment of a firm's financial condition using calculations and interpretations of financial ratios developed from the firm's financial statements

liquidity

the ease with which an asset can be converted into cash

Bookkeeping

the recording of business transactions, is a basic part of financial reporting

A journal is the place where:

transactions are first recorded

The third step in the Accounting Cycle

transfer (post) journal entries to ledger

The best way to understand a firm's financial health and stability is to look at its ______.

financial statements

what is the basis for the balance sheet?

fundamental accounting equation

Financial transactions

include buying and selling goods and services, acquiring insurance, paying employees, and using supplies.

The _______ statement summarizes profit (or loss), costs, and expenses over a specific period, which may be a week, a month, or a year.

income

What are the key financial statements of a business? (Select all that apply)

income statement statement of cash flows balance sheet

Bank, travel, and entertainment records will be found in which segment of the accounting system?

inputs

Which three activities are part of the function of accounting?

interpreting financial transactions classifying financial transactions recording financial transactions

Define FASB

it defines the generally accepted accounting principles GAAP that accountants must follow

current assets

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

Information in the journal is transferred to the ___________, so managers can find all the information about a single account in one place.

ledger

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

intangible assets

long-term assets (e.g., patents, trademarks, copyrights) that have no real physical form but do have value

A trial balance is a summary of all the financial data in the account ledgers and is used to ______.

make sure the figures are correct and balanced

debt to owners' equity ratio

measures the degree to which the company is financed by borrowed funds that it must repay

what does the financial statement include

balance sheet, income statement, statement of cash flows

Accounting Cycle

A six-step procedure that results in the preparation and analysis of the major financial statements.

assets that are equal to what you owe plus what you own (incurred liability)

Assets = Liabilities + Owner's Equity

What does the accounting cycle rely on?

Both the work of a bookkeeper and an accountant.

assets

Economic resources (things of value) owned by a firm.

True or false is it possible to understand business operations without being able to read, understand, and analyze accounting reports and financial statements.

False

FASB

Financial Accounting Standards Board

What is the heartbeat of a competitive business?

Financial management

The principles, defined by FASB, that accountants must follow to assure that a firm's accounting information is accurate are abbreviated as ______.

GAAP

What does accounting allow us to do?

It allows us to report financial information about nonprofit organizations such as churches, schools, hospitals, fraternities, and government agencies.

What is a bookkeeper's first task?

It is to divide all the firm's transactions into meaningful categories, such as sales, documents, purchasing receipts, and shipping documents.

what is a calendar year?

January 1 to December 31

fixed-assets

Long-term assets that are relatively permanent such as land, buildings, or equipment.

what must an accountant do if the financial data in the account ledgers is not accurate?

The accountant must correct and balanced it before preparing the firm's financial statements

5 step of accounting cycle

Using the correct information, the accountant then prepares the firm's financial statements.

What do financial statements indicate?

a firm's health and stability, and are key factors in management decision making.

what is a financial statement?

a summary of all the financial transactions that have occurred over a particular period

Through the recording, classifying, summarizing, and interpretation of financial events in an organization, the function of ______ helps managers make good decisions about the firm's operations.

accounting

What is considered to be the "language of business"?

accounting

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

accounting information

The method a company uses to record and summarize accounting data into reports is a(n) ______.

accounting system

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

accounting system

A current bill that a company owes to others that is the result of buying merchandise on credit is called ______.

accounts payable

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 2) Record 3) Transfer 4) Take 5) Prepare 6) Analyze (ARTTPA)

what is a fiscal year?

A fiscal year can begin at any date designated by the business.

the fourth step in the accounting cycle

Prepare a trial balance, a summary of all the financial data in the account ledgers that ensures the figures are correct and balanced.

The second step in the Accounting Cycle

Record financial data from original transaction documents, sales slips and so forth, into a record book or computer program called a journal.

Define accounting

Recording, classifying and summarizing financial transactions. Summarizes the activities of bookkeeping

The monetary value of what a firm received for goods sold, services rendered, and other payments is termed

Revenue

What do bookkeepers use that is a tool?

A specialized accounting book or computer program called a ledger.

What is often called the language of a business?

Accounting

What helps keep the heartbeat stable?

Accounting information

What type of method is used to record and summarize accounting data into reports.

Accounting system

account receivable

amount of money owed to the firm that it expects to receive within one year

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

What is the practice of writing every transaction in two places?

double-entry bookkeeping

What type of information is reported by accounting to stakeholders?

financial

Because they indicate a firm's financial health and stability, the use of ______ are key factors in management decision making.

financial statements

Basic EPS

helps determine the amount of profit a company earned for each share of outstanding common stock

diluted EPS

measures the amount of profit earned for each share of outstanding common stock, but also considers stock options, warrants, preferred stock, and convertible debt securities the firm can convert into common stock

Which of the following are inputs to the accounting system?

sales documents shipping documents

The key financial statements of a business are the balance sheet, the income statement, and the ______.

statement of cash flows

Assets minus liabilities equals

stockholders equity

Income Statement

summarizes revenues, cost of goods sold, and expenses (including taxes) for a specific period and highlights the total profit or loss the firm experienced during that period.

A _____ balance is a summary of all financial data in the ledgers which ensures the figures are correct and balanced.

trial