Understanding accounting and financial information

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 source documents 2. Record transactions in journals 3. Transfer journal entries to ledger 4. Take a trial balance 5. Prepare financial statements 6. Analyze financial statements

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

Accounting

The first step in the accounting cycle is to

Analyze source documents

Stakeholders who want to look at detailed financial information on whether a company is profitable, is able to pay it'd bills, and how much debt it owes will look at the firms

Annual report

Which three components make up the fundamental accounting equation

Assets Liabilities Owners equity

A(n) __________ ________ reports the firms financial condition on a specific date

Balance sheet

The financial statement that reports a firms financial condition at a specific time is the

Balance sheet

Leverage or Debt Ratios measure the degree to which a firms relies on

Borrowed funds

If an individual passes a rigorous examination established by the AICPA and meets a states educational and experience requirements, they can be recognized as a

CPA

Which three activities are part of the function of accounting

Classifying financial transactions Interpreting financial transactions Recording financial transactions

The purpose of the financial accounting standards board is to

Define generally accepted accounting principles

______________ accounting generates financial information for people outside the firm, while ____________ accounting generates financial information for people inside the firm

Financial, managerial

What are the three major activities of a firms shown on the statement of cash flows?

Financing Operations Investments

What type of assets are land, labor, buildings, and equipment?

Fixed assets

The principals defined by FASB, that accountants must follow to assure that a firms accounting information is accurate are abbreviated as

GAAP

The __________ statement reports a firms financial operations over a particular period of time, usually a year, a quarter of a year, or a month

Income

Which financial statement reports the firms financial operations over a particular period of time, usually a year, a quarter of a year, or a month

Income statement

Which financial statement shows a firms bottom line it's profit or loss after costs expenses and taxes for a specific period

Income statement

The major activities of a firm shown on the statement of cash flows include operations ____________ and financing

Investments

______________ratios measure the degree to which a firm relies on borrowed funds in its operations

Leverage

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

Liquidity

______________Ratios measure a company's ability to turn assets into cash to pay its short-term debt

Liquidity

A CPA must

Pass a series of exams Meet à states requirements for education and experience

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

Profitability ratios Liquidity ratios Debt ratios Activity ratios

an accountant who passes a series of examinations established by the American institute of certified public accountants ACIPA and meets the state's requirements for education and experience is recognized as a certified ________ accountant

Public

Which are steps in the accounting cycle

Record transaction in the journal Prepare a trial balance Analyze transactions

Which three activities are part of the function of accounting

Recording financial transactions Classifying financial transactions Interpreting financial transactions

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

Revenue

operating expenses include which of the following

Supplies Rent Utilities

Stockholders, or owners equity represents

The value of the business that belongs to owners

True or false: Profitability ratios measure how effectively a firms managers are using its various resources to achieve profits

True

The income statement shows

a firm's profit (or loss) after costs, expenses, and taxes

The relationship among assets, liabilities, and owners equity is a fundamental concept in accounting known as the _________ equation

accounting

recording, classifying, summarizing, and interpreting financial events in an organization is referred to as

accounting

Net income is

all revenue minus all expenses and taxes

The __________ ________ is the yearly statement of the firms financial condition, progress and expectations provided to stakeholders

annual report

Items of value owned by a firm are called

assets

_________ are economic resources owned by a firm

assets

The fundamental accounting equation is the basis for the

balance sheet

The ______________ line is another name for net income after taxes

bottom

examples of fixed assets include

buildings and equipment

The ability to read, understand, and analyze accounting reports and financial statements is critical in understanding

business operations

The statement of cash flows is a financial statement that shows

cash receipts and disbursements

Managerial accounting is concerned with

controlling measuring production costs preparing budgets

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

In accounting, liabilities refer to

debts a business owes to others

Because they indicate a firms financial health and stability, the use of __________ are key factors in management decision making

financial statements

The best way to understand a firms financial health and stability is to look at its

financial statements

The debt a firm owes to others is called a(n) ______.

liability

_____________ income after taxes is the last line on the income statement

net

The bottom line is another name for

net income or loss

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

operating expenses

The value of what stockholders own in a firm minus any liabilities is called

owner's equity

Financial accounting and managerial accounting differ in terms of who uses the information. Financial accounting provides information primarily for

people outside the organization

What type of ratios measure how effectively a firm is using its various resources to achieve profits?

profitability

The formula for the costs of goods sold is

purchase price + freight charges + storage costs

The assessment of a firms financial condition and performance through calculations and interpretation of financial ratios developed from the firms financial statements is called __________ analysis

ratio

An indirect measure of risk that tells us how much a firm earned for each dollar invested by its owners is called ______.

return on equity

________ is the monetary value of what a company received for goods sold, services rendered, and all other payments to the firm

revenue

cash receipts and disbursements related to operations, investments, and financing are reported on the

statement of cash flows

Return of equity is net income minus taxes divided by

total owners' equity