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
