Chapter 17 MGMT LearnSmart

The income statements shows:

a firms profit after costs, expenses, and taxes

Computerized ____ programs post information from journals instantaneously so that financial information is readily available

accounting

The method a company uses to record and summarize accounting data into reports is an ______ ______

accounting system

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

accounts

Net income is:

all revenue - all expense, including taxes

Cash recipes and disbursements related to operations, investments, and financing are reported on the:

statement of cash flows

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

Tax Accountant

What legislation prohibits accounting firms consulting services to companies they audit?

The Sarbanes Oxley Act - strengthens the protection of whistleblowers - requires CEOs to certify accuracy on financial reports

The key working areas of accounting include:

- tax, financial, government, not-for-profit, managerial accounting - auditing

The "bottom line" is:

- the net income or loss after taxes - the last line on the income statement

_____ ratios, such as inventory turnover, measure the effectiveness of managers in the basic function of creating profits

Activity

What is the term for all resources that come into the firm from operating activities?

Revenue

True Statements

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

The financial accounting ______ ______ defines the generally accepted accounting principles

Standards Board

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

balance sheet

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

balanced

A type of long-term liability that represents money lent to the firm that they must pay back is called a

bonds payable

Accounting Cycle

- Analyze source documents - Record transactions in journals - Transfer journal entries to a ledger - Take a trial balance - Prepare financial statements - Analyze financial statements

What are some benefits of using computers for accounting purposes?

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

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

intangible assets

On the statements of cam flows, when a company buys or sells a long term asset it is called an:

investment

The purpose of the Sarbanes-Oxley Act was to:

provide greater scrutiny of the accounting industry

If a firm has cash of 50,000, current assets of 500,000, and current liabilities of 200000, what is the current ratio?

2.50

The bottom line is another name for:

net income or loss

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

non-profit

Of the three major activities of a firm, _____ are cash transactions associated with running the business

operations

_____ earnings are cumulated earnings from the firm's profitable operations that were kept in business and not paid out to stockholders in distributions for company profits

retained

An accountants' time is freed up to do more important tasks such as financial analysis due to the assistance provided by using

computerized accounting programs

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

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

a capital account

A major purpose of ____ is to help managers evaluate the financial condition and the operating performance of the firm.

accounting

Net income and loss is the difference between:

revenues and expenses

The role of an auditor is to:

review and evaluate a company's financial information

Operating expenses can be classified into _____ expenses and ______ expenses

selling, general

What is the meaning of notes payable?

short-term or long-term liabilities that a business to repay by a certain date

Arthur Anderson was convicted of obstruction of justice for _____ records in the Enron case

shredding

Examples of profitability ratios include:

- basic earnings per share - return on equity - return on sales

Common financial transactions include:

- buying and selling goods - paying employees - acquiring insurance

The principles that accountants must follow in order to assure that a firm's accounting information is accurate are abbreviated as:

GAAP

A company's net sales minus cost of goods sold is called:

Gross Profit

bank, travel, and entertainment records will be found in which segments of the accounting system

Inputs

What type of rations measure the degree to which a firm relies on borrowed funds in its operations?

Leverage

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

Liabilities Assets Owners' equity

The _____ ____ is a yearly statement of the firm's financial condition, progress, and expectations provided to stakeholders

annual report

____= Liabilities + Owner's equity

assets

Its possible for a business to increase its sales and profits yet to still suffer ____ ____ problems

cash flow

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

cash flows

Earning per share is profit earned by a company for each share of outstanding _____ _____

common stock

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

common stock

_____ is the systematic write-off of the cost of a tangible assets over its estimated useful life

depreciation

Return on ___ is net income after taxes divided by total owner's equity

equity

Accounting provides _____ statements that are critical to understanding the health of a business

financial

In order to understand business operations, you must be able to read, understand, and analyze:

financial statements

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

financial statements

Of the three major financial activities of a firm, ______ is cash raised from the issuance of new debt or equity capital

financing

____ assists are long-term assists like land, buildings, and equipment

fixed

Return on sales is net ____ divided by net sales

income

The _____ _____ summarizes all the revenue from operation activities, money resources used up, expenses, and resources left after all costs and expenses

income statement

An ____ audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements

independent

A _____ is a record book or computer program where accounting data are first entered

journal

Financial data from transactions documents are first recorded in a _____. The data are then traceried into categories in a ______, so managers can find all the information about a single account in one place

journal, ledger

The debt a firm owes to others is called a ______

liability

The current ratio is an example of an ____ ratio that measures a company's ability to turn assets into cash to pay its short-term debts

liquidity

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

liquidity

Managers inside the organization are most likely to use ______ accounting

managerial

Financial accounting and managerial accounting differs in terms of who uses the information. Financing accounting provides information primarily for:

people outside the organization

_____ ratios measure how effectively a firm is using its various resources to achieve profits

profitability

What type of accountant would be variable to businesses or individuals on a fee basis

public accountant

Government and not-for-profit accounting involves working for organizations whose purpose is to serve:

ratepayers taxpayers

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

the inventory turnover ratio

Stockholders, or owners equity represents:

the value of the business that belongs to owners

Double-entry bookkeeping requires that every transaction be recorded in ______ places.

two

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

- pass a qualifying exam - meet the educational requirement - be certified by the Institute of Certified management Accountants

Managerial accounting is concerned with

- preparing budgets - measuring production costs - controlling

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

- recording, classifying, interpreting financial transactions

On a balance sheet, assets may include:

- tangible and non tangible resources

Accounting Bookkeeping Accounting Cycle Trial Balance

- classifying, summarizing, interpreting, and reporting - Recording - Series of six steps - Summary of data in ledgers

managerial accounting is concerned with:

- controlling - preparing budgets - measuring production costs

The purposes of auditing include:

- examining the financial health of an organization - looking into operational effectiveness and efficiency - evaluating records - reviewing records

The major activities of a firm shown on the statements of cash slows include:

- financing - operations - investments

What are the main types of financial ratios used in ratio analysis

- liquidity - debt - activity - profitability

Which of the following are considered disciplines within accounting profession:

- managerical accounting - financial accounting - tax accounting

A CPA must

- meet state's requirements for education and experience - pass a series of exams

Which of the following would be shown on an income statement

- operating expenses - net income - revenue

Which of the following provides a summary of money coming into and going out of the firm

Statement of cash flows