ISOM chp 14
Which three were part of the Sarbanes-Oxley Act passed in the early 2000s?
-Required firms to be more rigorous in their accounting and reporting practices -Required separation of consulting and auditing -Punished corporate executives with potential jail sentences
-selling expenses -general and administrative expenses -interest expenses -research and development
-advertising and sales salaries -costs of owning and maintaining the general office -direct costs of borrowing money -includes the costs for people equipment and informaito used to design and bu
Select from the following all the ways that managers and business owners use financial statements. (Select all that apply)
-to assist in reporting to the IRS -to aid in internal planning & control -for reporting information to employees
Which of the following must be repaid within 1 year?
Current liabilities
Cash from operating activities is calculated by combining the changes in which four accounts?
Current liability accounts Expense accounts Revenue accounts Current asset accounts
Financial statements prepared by accountants would be used by which of the following stakeholders of a business? (Select all that apply)
Government agencies Creditors Investors Managers
Research and development expenses include the costs of which of the following? (pick four answers)
Scientific personnel Marketing personnel Engineering personnel Equipment used to design prototypes
Certified Management Accountant (CMA)
a professional accountant who has met certain educational and experience requirements, passed a qualifying exam, and been certified by the Institute of Certified Management Accountants
Organizations evaluate their operations through the recording, measurement, and interpretation of financial information. This process is known as _______.
accounting
The relationship among assets, liabilities, and owners' equity is a fundamental concept in accounting known as the _______ equation.
accounting
Amounts owed to suppliers for goods and services purchased with credit are called ____.
accounts payable
Which of the following is an asset of a business?
accounts recievable
This is an account representing all unpaid financial obligations incurred by the organization.
accrued expenses
Accrued expenses represent ______.
all unpaid financial obligations of a firm
Terry's Tire shop has replaced the tires on ten delivery trucks for one of his best clients--Deliveries 4U. Terry is allowing Deliveries 4U to pay for the tires over a period of time. The money owed to Terry by Deliveries 4U is considered ______.
an accounts receivable
Receivables turnover is a type of _____ ratio.
asset utilization
Ratios that measure how well a firm uses its assets to generate each $1 of sales are ______.
asset utilization ratios
To be most effective, liquidity ratios should be examined in conjunction with ______.
asset utilization ratios
Economic resources owned by a firm are called .
assets
In the fundamental accounting equation = Liabilities + Owners' equity.
assets
The current ratio is calculated by dividing current by current .
assets liabilities
Double-entry bookkeeping strives to maintain the ______ of the accounting equation.
balance
A(n) ______ reports the firm's financial condition on a specific date.
balance sheet
Cost of goods sold is calculated by using ______.
beginning inventory, interim purchases, and ending inventory
Managers of most firms tend to keep debt-to-asset levels ______.
below 50 percent
A(n) is an internal financial plan that forecasts income and expenses of the organization for a set period of time.
budget
A(n)___________ is an internal financial plan that forecasts income and expenses of the organization for a set period of time.
budget
Owners' or Stockholders' equity ______.
can come from past profitable operations or from money investors have given the firm
Of utmost importance to management is/are _____, which is the movement of money through a firm on a daily, weekly, monthly, or yearly basis.
cash flow
The major activities of a firm, as shown on the statement of cash flows, include all of the following EXCEPT ______.
cash from taxes
_____ is the movement of money through an organization over a daily, weekly, monthly, or even yearly basis.
cash-flow
Forensic accountants would most likely become certified as ______.
certified fraud examiners
A private accountant that has passed a rigorous examination by the Institute of Management Accountants may become certified as a(n) ______.
certified management accountant (CMA)
An individual who has been certified by the state in which he or she practices and has the right to express, officially, an unbiased opinion regarding accuracy of a client's financial statements works as a(n) _____.
certified public accountant
Gross income or profit equals revenues minus the ______ required to generate the revenue.
cost of goods sold
The amount of money a firm spent to buy or produce the products it sold during the period to which the income statement applies is ______.
cost of goods sold
Assets that can or will be converted into cash within one year are termed ______.
current assets
Items that can or will be converted into cash within one calendar year are called short-term assets or assets.
current assets
The _____ ratio indicates how much of an organization is financed by debt and how much by owners' equity.
debt to total assets
A ratio indicating how much of the firm is financed by debt and how much by owners' equity is the definition of ______.
debt to total assets ratio
Ratios that measure how much debt an organization is using relative to other sources of capital, such as owners' equity are ______ ratios.
debt utilization
The process of spreading the cost of a tangible asset over its estimated useful life is referred to as ______.
depreciation
Forensic accountants act much like ______.
detectives
A system of recording and classifying business transactions in separate accounts is called - bookkeeping
double entry
List the steps in the accounting cycle from beginning to end. (Note: the first step in the process should be at the top of your list)
examine source documents record transaction post transaction prepare financial statement
The cost incurred in the day-to-day operations of an organization is known as ______.
expenses
The costs incurred in the day-to-day operations of an organization are called
expenses
True or false: An expense statement provides an explanation of how the company's cash changed from the beginning of the accounting period to the end.
false
True or false: CPAs pass and obtain their certification through the federal government.
false
True or false: Organizational budgets are always prepared on a monthly basis.
false
The accounting specialty that analyzes financial documents in search of fraudulent entries or financial misconduct and, therefore, is fit for legal review is ______ accounting.
forensic
The accounting cycle is most known as being a _____-step process.
four
There are more than 75,000 certified _____ examiners across the United States who work to root out evidence of "cooked books" in firms.
fraud
Cash from financing activities is calculated _______.
from changes in the long term liability accounts and the contributed capital accounts in owners' equity
Depreciation is considered a type of ______.
general & administrative expense
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
Debts that a firm owes to others are called
liabilities
Debts that a firm owes to others are called .
liabilities
current
liabilities must be repaid within one year.
All assets on a balance sheet are listed in descending order of _____.
liquidity
Ratios that measure the speed with which a company can turn its assets into cash to meet short-term debt are ratios.
liquidity
The current ratio is known as a(n) _____ ratio.
liquidity
The internal use of accounting statements by managers in planning and directing the organization's activities is known as
managerial accounting
The internal use of accounting statements by managers in planning and directing the organization's activities is referred to as ______.
managerial accounting
A budget that covers the entire firm and not just individual departments is called a(n) _____ budget.
master
If the amount after calculating cash from financing activities is ______, the company is likely paying off long-term debt or returning contributed capital to investors.
negative
If an accountant were to take a firm's total revenue and deduct all expenses (including taxes), the result would be ______.
net income (or loss)
The difference between revenue and expenses is called ______.
net income or loss
Cash from ______ activities is calculated by combining the changes in the revenue accounts, expense accounts, current asset accounts, and current liability accounts.
operating
Which two terms are synonymous with the term "income statement"?
operating statement p&l statement
All of the money that has been contributed to a firm that never has to be paid back is called
owner's equity
All of the money that has been contributed to a firm that never has to be paid back is called ______.
owner's equity
Owners' contributions to the organization in combination with income earned and retained to grow and develop the firm are called ______.
owner's equity
Data used by investors to compare the performance of one company with another on an equal, per share basis is the definition of ______.
per share data
The process of transferring information from a journal to a ledger is known as ______.
posting
private accountants
prepare and analyze their financial statements
Gross income and gross earnings are two equivalent terms for gross
profit
Gross income and gross earnings are two equivalent terms for gross .
profit
Revenue minus the cost of goods sold is called gross ______ or ______. (Select two answers)
profit income
Which three are examples of profitability ratios?
profit margin return on assets return on equity
A analysis calculates an organization's financial health.
r
Sales divided by accounts receivable is the definition of ______.
receivables turnover
Sarbanes-Oxley Act
required firms to be more rigorous in their accounting and reporting practices
Net income divided by assets is the definition of ______.
return on assets
_______ is/are the total amount of money received (or promised) from the sale of goods or services, as well as from other business activities such as the rental of property and investments.
revenue
Inventory turnover is defined as ______.
sales divided by total inventory
Revenue is defined as ______.
sales plus other money coming into the firm
Earnings per share is the ratio of net income, or profit, to ______.
shares of stock outstanding
In any accounting system, financial data typically pass through a four-step procedure sometimes called _______.
the accounting cycle
The balance sheet takes its name from its reliance on ______.
the accounting equation
The definition of accounts payable is ____.
the amount a company owes to suppliers for goods and services purchased with credit
Forensic Accounting
the practice of accounting for legal purposes
How many times a firm collects its accounts receivable in one year is measured by ______.
the receivables turnover
True or false: Each share of stock in a corporation represents a claim on the organization.
true
True or false: People both inside as well as outside of an organization use accounting tools to evaluate organizational operations.
true
Like its name suggests, double-entry bookkeeping requires that business transactions be recorded in______ separate accounts
two
bookkeeping
typically limited to the routine, day-to-day recording of business transactions
accountants
usually complete course work beyond their basic 4 or 5 year college degree
The _____ format balance sheet is newer and gaining wide acceptance. It shows assets on the top followed by liabilities and owners' equity.
vertical
Select from the following the two formats of balance sheets.
vertical traditional
_____ is an intangible asset that often includes an organization's reputation.
Goodwill
Which of the following is the main distinguishing factor between accountants and bookkeepers?
Accountants analyze and interpret financial information and bookkeepers do not.
Which of the following is an accurate statement regarding the role of an accountant?
Accounting usually requires coursework beyond a college accounting degree.
Certified Public Accountant (CPA)
An individual who has been certified by the state in which he or she practices to provide accounting services ranging from the preparation of financial records and the filing of tax returns to the complex audits of corporate financial records.
Which of the following is considered the most important component of an annual report?
CPA's signature
Select the three terms that are equivalent to the term operating income.
Earnings before interest and taxes operating profit Income before interest and taxes
Which of the following ratios is important in determining a company's overall stock price?
Earnings per share ratio
In different types of businesses as well as different countries, different accounting terms may be used for the same concept. For example, revenue is equivalent to which of the following terms? (pick two answers)
Goods or services sold Sales
What does it mean to say that an annual report has been audited?
It bears the signature of a CPA attesting that the document is an accurate reflection of the financial condition of the firm.
Which of the following accurately describe profit margin for a business? (pick three answers)
It is computed by dividing net income by sales It shows the overall percentage profit earned by a company The higher the profit margin, the higher the return on every dollar of revenue for the business
Which of the following is NOT a characteristic of a balance sheet?
It states that liabilities must equal owners' equity.
Which of the following scenarios most warrants an organization using a "bottom-up" budget?
Larger, fast-growing organizations
______ refers to how fast an asset can be converted into cash.
Liquidity
What type of ratio measures the speed with which a company can turn its assets into cash in order to meet its debts?
Liquidity ratio
Which of the following is a liability of Eggs4U, an online free-range egg supply company?
Money owed for purchased chicken feed
Which three components make up the accounting equation?
Owners' equity Assets Liabilities
External statements that managers in an organization may prepare are used for which of the following? (select all that apply)
Preparing the annual report Reporting results to stockholders Obtaining credit from lenders Filing income taxes
Which of the following would most likely include a title of controller or internal auditor?
Private accountant
______ ratios measure how much operating income an organization is able to generate relative to assets, owners' equity, and sales.
Profitability
What are the three common expense accounts shown on an income statement?
Research, development, and engineering expenses Selling, general, and administrative expenses Interest expenses
Which calculation shows how much income the firm produces for every dollar it invests in assets?
Return on assets
owners ____
includes all the money that has ever been contributed to a company that never has to be repaid
A firm's profit margin is based solely on data found on the ______.
income statement
Which report summarizes an organization's profitability over a specific period, which may be a week, a month, or a year?
income statement
A ratio analysis combines information from which two reports?
income statement balance sheet
Sales divided by total inventory is called turnover and this calculation indicates how many times a firm sells and replaces its inventory over the course of a year.
inventory
accounting cycle
is a four step procedure accounting system
budget
is an internal financial plan that forecasts income and expenses of the organization for a set period of time.
Accounting
is the recording, measurement, and interpretation of financial information
A(n) is a time-ordered list of account transactions.
journal
After source documents are examined, each financial transaction is recorded in a .
journal
In the accounting cycle, financial transactions are recorded in a ______, which is a time-ordered list of account transactions.
journal