financial literacy (module 4)

What are common depreciation methods except:

1) Declining-balance 2) Straight-line 3) Units of production

Different types of Accounting Journals

1= assets 2=liabilities 3=equity 4=revenues 5=cogs 6=expenses 7=taxes

the cash flow statement is broken into:

2 categories,the Beginning balance & ending balance.

Profitability is measured by how many variants?

3

What is the margin percentage for a product with $5 revenue and $3 cost?

5-3/3==40%

Equity is

A debt.. Example, money owners put into the business and money business earns over time.

When sales are made on account, what happens on the balance sheet?

Account receivable increases

Current liabilities include

Accounts payable, which is any debt due to supplies.

An account with the word "prepaid" in the title is a(n):

Asset

COGS should be reported

At the time of sales

The Financial Statement documents are:

Balance sheet, income statement , cash flow statements, statement of change in equity.

When faced with uncertainty about the amount at which assets and liabilities should be recorded, accountants should follow which principle, in order to avoid misleading users of financial statements?

Conservatism

Expenditures are divided into which 2 categories?

Cost and Expenses/

Expenses are:

Costs incurred to generate revenues

Liabilities are reported in 2 categories

Current Liabilities & Long term Liabilities

Which depreciation method is considered an accelerated method?

Declining-balance

Activities involving obtaining necessary funds to purchase long-term assets, repay existing obligations and provide a return for owners are referred to as:

Financing activities

The first Profitability variant is called

GRoss Margin; which measures profitability from production activities. .

the accounting concept which assumes that, absent any information to the contrary, the business will continue into the foreseeable future is the:

Going concern concept

The formula to calculate Operating Income is

Gross Margin - Operating cost.

Negative Cash Flow is not always bad news

IF its do to more investment or repayment of loans, it could a positive.

A credit is used to record a(n):

Increase in a liability account

Net Fixed Assets

Items necessary to run a business BUT DO NOT VARY

the 7 types of accounting journals are summarized where?

LEDGER

Which inventory costing method assigns the earliest units received to cost of goods sold?

LIFO

Assets equal what?

Liabilities + equity

Accounting journals

Made of transactions. These Transactions are categorized into revenue, cost and taxes.

Financial Statements are:

Made up of 4 documents and focus on PAST performance of a company

What is NET INCOME

Money earned, but not yet PAID. It is also called the BOTTOM LINE.

The third Profitability variant is called

Net income, which measures,Gross Margin, operating expenses & any non related expenditures.

the second Profitability variant is called

Operating income; which measures GRoss Margin & operating Expenses.

Example of a Balance Sheet

Owns=machinery, properties, assets Owes=Bank loans,debt, taxes

Income statement

P&L. Summary of sales, expenses, & profits of a company. Think COGS, Revenues ,Expenses & taxes

he accounting concept requiring that the profits of a business be determined at regular intervals throughout the life of the business is the:

Periodicity concept

_____ is/are not an example of non-operating income or expense.

RENT

Cash Flow statements

Record of $$ in the bank . Includes, inflow, outflow and reserve of $$$

What are the requirements for information to be useful?

Relevance and reliability

How do you measures Gross Margin?

Revenue - Cost

Which depreciation method produces an equal amount of depreciation each period?

Straight line

Only Public Companies have to publish Financial Statements... True or False?

TRUE

Liabilities are

The NEGATIVE side of the balance sheet . Think Loan, refurbishment

Assets are

The POSITIVE Side of the BALANCE SHEET and have A DOLLAR VALUE. Think Cash, property, machinery

whats the difference between revenue and cash?

The income statement reports revenue the cash flow statement reports cash.

The cash flow statement is

The last statement in the financial statement. it records cash over a period of time.

COGS are reported at

Time of SALE in the INCOME STATEMENT

Amortization:

a method used to allocate the cost of an intangible asset over its limited useful life

A system used to identify, analyze, measure, record, summarize and communicate relevant economic information to interested parties is referred to as a(n):

accounting system

When a company borrows cash from a bank, what will occur?

an increase in cash

Long term Liabilities are

any debt NOT due within the next 12 months.

Activities involving the purchase and sale of long-term assets as well as other major items used in a business's operation are referred to as:

investing activities

the ____________________ requires that the expenses incurred to generate revenue should be recognized in the same period.

matching principal

financial statements can be fond

on the SEC website

Balance Sheet

record of what the company owns and owes. Think Asset, Liabilities and Equity

Statement of changes in equity

records changes in company ownership between shareholders. (not key document)

The SALE becomes Revenue only when

the invoice is issued. (before that there is no formal agreement)

In the sales cycle, the sale is entered as revenue only

when the invoice has been issued