WGU Principles of Accounting VYC1
Which characteristic of an organization is assessed using financial statement analysis?
Solvency
Which concept is measured by the current ratio?
Liquidity
What would an accountant debit in order to record the purchase of machinery made using a long-term loan?
Machinery
Why would an accountant conduct financial forecasting?
To determine if a company will need additional investors
Why are special journals used in accounting information systems?
To group together transactions of a similar type
How is a worksheet used?
To help prepare adjusting entries and financial statements
A firm has the following assets and liabilities: Cash: $10,500 Accounts Receivable: $35,000 Allowance for Doubtful Accounts: $2,000 Accounts Payable: $8,000 After preparing a classified balance sheet, what should the firm's total assets and liabilities be?
Total assets of $43,500, and total liabilities of $8,000
Which financial statement is used to ensure that all debits and credits balance?
Trial balance
Record the Uncollectible Accounts Adjustment
When a company estimates uncollectible accounts, they make an adjusting entry by debiting Uncollectible Accounts Expense, thus recording the operating expense in the proper period. The credit is to an account called Allowance for Uncollectible Accounts. The Allowance for Uncollectible Accounts is a contra-asset account to Accounts Receivable.
A firm sells a truck to a customer for $35,000, and the customer is required to pay for the vehicle within 90 days. How is this purchase entered on the firm's accounts receivable ledger?
$35,000 debit
An accounting supervisor is reviewing a junior accountant's journal entries prior to posting to the general ledger. Which journal entry would cause the trial balance to be imbalanced?
$600 insurance bill received and paid in the same month; $600 debit to insurance expense and $60 credit to cash
Estimating Uncollectible Accounts
Accountants use two basic methods to estimate uncollectible accounts for a period. The percentage-of-sales method focuses on the income statement and the relationship of uncollectible accounts to sales. The percentage-of-receivables method focuses on the balance sheet and the relationship of the allowance for uncollectible accounts to accounts receivable.
Which account balance is entered in the balance sheet columns from the adjusted trial balance?
Accounts receivable
Source Document
A business paper from which information is obtained for a journal entry
Income Statement
A financial statement showing the revenue and expenses for a fiscal period.
Statement of Cash Flows
A financial statement that provides financial information about the cash receipts and cash payments of a business for a specific period of time.
Balance Sheet
A financial statement that reports assets, liabilities, and owner's equity on a specific date.
Sarbanes-Oxley Act
A law passed by Congress that requires the CEO and CFO to certify that their firm's financial statements are accurate. Section 404 of SOX states that top management must certify the company's internal controls and that the effectiveness of the system has been assessed. Section 404 was put into place to reduce the likelihood of fraudulent financial reporting. In addition, Section 802 of SOX imposes more severe penalties; because top management is taking responsibility for both the financial reporting and internal controls, they will be subject to more severe penalties and possibly prison time if the financial statements are found to be fraudulent or misleading.
General Ledger
A ledger that contains all accounts needed to prepare financial statements and includes assets, liabilities, equity, revenue and expenses
direct write-off method
A method of accounting for bad debts that involves charging receivable balances to Bad Debt Expense at the time receivables from a particular company are determined to be uncollectible.
allowance method
A method of accounting for bad debts that involves estimating uncollectible accounts at the end of each period.
percentage of net sales method
A method of estimating uncollectible accounts expense in which a business assumes that a certain percentage of each year's net sales will be uncollectible
Consensus Decision Making
A process whereby a group of individuals share ideas, solutions, and concerns to find a resolution to a problem that all members of the group can accept.
bank reconciliation
A report that accounts for the differences between the bank statement and a checkbook balance
STEPS 1-4 ACCOUNTING CYCLE
ANALYZE transactions by examining source documents JOURNALIZE transactions in the general journal POST entries to the respective accounts in the general ledger PREPARE a trial balance of the unadjusted accounts and begin the trial balance worksheet
STEPS 5-8 ACCOUNTING CYCLE
ANALYZE transactions by examining source documents JOURNALIZE transactions in the general journal POST entries to the respective accounts in the general ledger PREPARE a trial balance of the unadjusted accounts and begin the trial balance worksheet
8 Steps of the Accounting Cycle
ANALYZE transactions by examining source documents JOURNALIZE transactions in the general journal POST entries to the respective accounts in the general ledger PREPARE a trial balance of the unadjusted accounts and begin the trial balance worksheet JOURNALIZE and post adjusting journal entries, prepare adjusted trial balance, and complete worksheet PREPARE the financial statements JOURNALIZE and post closing entries Prepare the post-closing trial balance
Annual depreciation formula
ASSET COST - ESTIMATED RESIDUAL VALUE / ESTIMATED YEARS OF USEFUL LIFE
5 types of General Ledger Accounts
ASSETS- Cash, Accounts Receivable, Supplies, Equipment, Inventory, Property, Plant and Equipment LIABILITIES- Accounts Payable, Notes Payable, Unearned revenue OWNER'S OR STOCKHOLDER'S EQUITY- Common stock, Retained earnings, Capital REVENUE- Sales revenue, Interest revenue, Dividend revenue, Rent revenue EXPENSES- Car repair expense, travel and entertainment expense, Salary expense, Misc. expense
The company will construct its financial statements from information in the ____.
Accounts receivable and accounts payable batch logs.
Why are adjusting entries made?
Adjusting entries bring the amounts in the general ledger accounts to their proper balances before the company prepares its financial statements. Report revenues that have been earned but not yet entered into the accounting records, Report expenses that have been incurred but have not yet been entered into the accounting records Report revenues already recorded that pertain to a future accounting period Report expenses already recorded that pertain to a future accounting period.
Deferred items
Adjusting entries involving data previously recorded in the accounts. Data are transferred from asset and liability accounts to expense and revenue accounts. Examples are prepaid expenses, depreciation, and unearned revenues.
AAA
American Accounting Association Encourages research and study at a theoretical level into the concepts, standards, and principles.
AICPA
American Institute of Certified Public Accountants Issued Accounting Research Bulletins recommending certain principles or practices. Issued 31 numbered opinions that CPAs generally are required to follow. Continues to influence the development of accounting standards and practices.
What should be considered when deciding on a time period for a budget?
Amount of financial activity
What determines the frequency of deposits of federal income taxes withheld and Social Security and Medicare taxes?
Amount owed by the firm
Liabilities
Amounts owed to creditors
Revenue
An increase in owner's equity resulting from the operation of a business ex: Sales revenue, Interest revenue, Dividend revenue, Rent revenue
Memo
An informal correspondence written within an organization. DATE TO FROM SUBJECT BODY The direct organization strategy presents the purpose of the document in the first paragraph (sometimes the first sentence) and provides supporting details in the body. Action information (such as deadlines or contact information) or a courteous closing statement is placed in the last paragraph.
What should be done if the trial balance debit and credit columns are not equal?
Analyze the trial balance and financial records to find the error
Writing off Receivables
As time passes and a firm considers a specific customer's account to be uncollectible, it writes that account off. It debits the Allowance for Uncollectible Accounts. The credit is to the Accounts Receivable control account in the general ledger and to the customer's account in the accounts receivable subsidiary ledger.
Accounting Equation
Assets = Liabilities + Stockholder's Equity
What are the key components of every double-entry accounting record?
At least one debit entry and at least one credit entry
Stevie and Kate are new business owners trying to decide on a price for widgets. Stevie decided widgets should be $40. Which type of decision-making style did Stevie use?
Autocratic
Which financial statement(s) contain the information needed to compute the current ratio?
Balance sheet
unclassified balance sheet
Balance sheet that broadly groups assets, liabilities, and equity accounts.
Employee factors
Behavioral control: The business has the right to direct or control how the person does their work. Financial control: Worker is reimbursed for expenses. Relationship of parties: Worker receives benefits like insurance, a pension, or paid vacation. Written contract states worker is an employee.
independent contractor factors
Behavioral control: Worker decides how, when, or where to do the work; which tools to use; and where to purchase supplies. Financial control: Worker has a significant investment in his or her work, are not reimbursed for expenses, and may incur profit or loss. Pays own income tax and unemployment insurance. Relationship of parties: Worker does not receive benefits. Written contract states worker is an independent contractor.
Which form of communication should be used to convey to investors about the successes and future plans of the company?
Business report
How can accounting technology affect small businesses?
By simplifying the daily posting of routine transactions with accounting packages
Which account appears on a post-closing trial balance?
Capital stock
It is important to analyze cash accounts before closing the accounting cycle because ____.
Cash is an unsecured asset.
what are the 4 basic steps in the closing process?
Closing the revenue accounts—transferring the balances in the revenue accounts to a clearing account called Income Summary. Closing the expense accounts—transferring the balances in the expense accounts to a clearing account called Income Summary. Closing the Income Summary account—transferring the balance of the Income Summary account to the Retained Earnings account. Closing the Dividends account—transferring the balance of the Dividends account to the Retained Earnings account.
Where should deadlines be included in a business letter?
Conclusion
James is a manager at a university. He has been asked to make a decision regarding the need for new employees. He asks Mary for advice, as she has made similar decisions in the past. What role in the RACI matrix does Mary hold?
Consulted
A company has four employees who are paid every two weeks. Each biweekly payroll has a total expense of $7,500 and covers ten working days. The company accountant is completing the bookkeeping for January, which includes four days of the current pay period. Which adjustment will need to be entered for these accruals?
Credit salary payable for $3,000
A corporation had not yet received the monthly electric bill, so it decides to accrue an estimate of $1,000. What would appear in the appropriate journal entry?
Credit to utilities payable
If cash is used to prepay an annual insurance policy, this will result in ____.
Current assets declining and current liabilities increasing.
If a company's employees have earned payroll of $250,000 but have not been paid yet, the following entry is required in the accounting period.
Debit cash for $250,000 and credit payroll expense for $250,000
ABC company just purchased computer equipment to be used over a 5 year period in the total amount of $10,000. They pay the computer vending company $2,000 in cash now and agree to pay the remaining $8,000 over the next 12 months. How does the purchasing company account for this transaction?
Debit the Computer Equipment asset account for $10,000, Credit the Cash asset account for $2,000 and Credit the Loans Current liability account for $8,000.
A corporation paid $5,000 in gross pay to its employees for the current month's payroll. Which entry is needed?
Debit wages expense $5,000
Mindy owns a small accounting firm that is considering increasing their prices for some services. She calls the entire staff of 10 accountants to vote on which services should make price changes. Which type of decision-making style is Mindy using?
Democratic
What must an accountant record when journalizing a transaction?
Description of the transaction
Which statement reflects effective internal controls?
Each check should be matched to an approved invoice or payment authorization.
earnings per share of common stock
Earnings available to common stockholders' / Weighted—average number of common shares outstanding Measure of the return to investors per share
Jim made a budget and tracked his expenses in the month of June. Expected Actual Rent $1,200 $1,200 Gas and Travel $150 $220 Groceries $400 $310 Eating out $100 $180 Savings contrib $40 $40 What can Jim do in July to make his expected budget align more closely with his actual budget?
Eat at restaurants less, and get more groceries to cook at home.
On March 5, a company purchased a new machine for $10,000 cash. The machine has an estimated useful life of five years and an estimated salvage value of $2,000. The company plans to use straight-line depreciation. How will this be posted into the general ledger at the time of purchase?
Equipment $10,000 debit and cash $10,000 credit
Which accounts do closing entries move to retained earnings?
Expense and revenue
Why is financial accounting information valuable to consumers?
External users can evaluate the financial health of a business.
FACTS VS ASSUMPTIONS
FACTS- verified by clear, unambiguous evidence and can be tested ASSUMPTIONS- not supported by evidence and assumptions about the future cannot be tested in the present
mandatory employer payroll contributions
FICA social security tax- gross pay x 6.2% FICA medicare tax- 1.45% of every employee's gross pay federal unemployment tax- 0.6% of the first $7,000 of an employee's earnings state unemployment tax- rate is provided by the state annually voluntary deductions matching- 401k retirement plans
FASB
Financial Accounting Standards Board Establishes generally accepted accounting standards for publicly traded companies. Issued numerous Statements of Financial Accounting Standards. Responsible for the development of new financial accounting standards.
Which organization is focused on developing generally accepted accounting principles (GAAP) within the United States?
Financial Accounting Standards Board (FASB)
What information does a balance sheet show?
Financial position of a business at a specific date
common-sized statements
Financial statements that show only percentages and no absolute dollar amounts
GAAP
Generally Accepted Accounting Principles. The standards and rules that accountants follow while recording and reporting financial activities.
GASB
Governmental Accounting Standards Board Responsible for the development of new governmental accounting concepts and standards. Has the authority to issue interpretations of these standards.
How is a business letter formatted>
HEADING- establishes the sender, often including address, date, reference INTRODUCTION- establishes the purpose BODY- articulates the message. key information and importance, list any important dates, discussions, and conversations, ask questions CONCLUSION- restates the main point and may include a call to action like a deadline and contact information SIGNATURE LINE- sometimes includes the contact information
Leticia knows that the income statement she is preparing for her organization will be shared with investors who are not accounting professionals. What should Leticia do to ensure effective communication with the investors?
Have a verbal discussion with the investors to provide additional feedback after they have had an opportunity to read the income statement
Marcus collected this data in his budget for the month of March: Cash from handyman work $70 Paycheck income $1,500 Rent and bills -$800 Purchase of lawnmower -$150 Total income $1570 Total Expenses -$950 Which description matches Marcus' March budget?
He ran a surplus of $620.
Which item is a living expense?
Health care premiums other ex: housing, food, taxes
Formula for computing interest
INTEREST= PRINCIPAL x RATE x TIME
Why was the Sarbanes-Oxley Act enacted?
In response to numerous U.S. corporate accounting scandals
Which financial statement(s) contain the information needed to compute return on sales?
Income statement
Which statement is a financial accounting statement?
Income statement
What should a journal entry include when a company purchases inventory on account?
Increase in liabilities
What does horizontal analysis evaluate?
Increases or decreases in financial statement information over a period of time
What is a characteristic of an asset account?
Increases with a debit
Which account will be a part of the adjusting journal entry to record the interest that has been incurred, but not paid, on a note payable?
Interest payable
What is an example of a macro factor in planning a budget?
Interest rates
A chief financial officer (CFO) wants to increase the net income and assets on the financial statements in order to get a bank loan. The CFO increased revenues and accounts receivable by $50,000 to improve the financials even though there was not an actual sale to a customer for that amount. What is this behavior considered, according to accounting ethics standards?
It is unethical because it was fraudulent financial reporting.
Why is the accounting cycle important?
It results in the creation of the company's financial accounting statements.
A company has a lease that requires the company to pay its annual office space rent in advance on December 31 of each year. On a quarterly basis, this expense totals $10,000. How should the rent expense be recorded on the firm's books in the following year to account for this transaction?
It should be recorded as a decrease of $40,000 in the asset accounts under prepaid rent.
What is a drawback of the United States using International Financial Reporting Standards (IFRS)?
It would cost U.S. companies time and money in the short term to adopt.
Adjusting Entry
Journal entries usually dated the last day of the accounting period or at any time financial statements are to be prepared to bring the balance sheet and income statement up to date on the accrual basis of accounting, making sure revenues and expenses match.
Which step should an accountant perform next after analyzing source documents to determine their effects on the basic accounting equation?
Journalize the transactions
When considering accounting journal entries and the preparation of financial statements, debits will increase ____.
Liabilities and revenues
Alex received accounting information via a message that was formatted with a header that included date, to, from, and subject lines. Which form of communication was used?
Memorandum
Percentage-of-receivables method
Method of estimating uncollectible accounts based on the percentage of accounts receivable expected not to be collected
What should be included in a short-term budget?
Monthly water bill expenses
What is a benefit of adopting a single set of international accounting standards?
More uniform financial reporting among international companies
Liabilities Stockholder's Equity Revenue Dividends
Normal Balance: CREDIT To increase: CREDIT To decrease: DEBIT
Assets Withdrawals Expenses
Normal Balance: DEBIT To increase: DEBIT To decrease: CREDIT
Liabilities
Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word "payable" in the account title. Liabilities also include amounts received in advance for a future sale or for a future service to be performed ex: accounts payable, notes payable, loans payable, wages payable, interest payable, customer deposits, deferred revenues, unearned revenue
Which list includes assets held by a local small business?
Office equipment, company vehicles, and cash
A company writes a check to purchase a case of printer cartridges. Which account would be debited in the journal entry to record this purchase?
Office supplies
Accrued items
One of the types of adjusting entries that are made at the end of the accounting period in order to report (1) revenues that have been earned but have not yet been entered into the accounting records, and/or (2) expenses that have been incurred but have not yet been entered into the accounting records.
Which group should make use of financial accounting information when determining whether to open an additional store location?
Owners and managers
Trial Balance Blueprint
POSSESS- Assets Current Long Term OWE- Liabilities Current Long term INVEST- Stockholder's Equity Capital Retained Earnings EARN- Revenue Currency Promise (A/R) USE-UP- Expenses Cost of Goods Sold Operating Expenses
Which method is used when calculating uncollectible accounts expense using the income statement approach?
Percentage of net credit sales
Effective Listening Strategies
Recognizing the difference between fact and opinion Uncovering assumptions Being open to new ideas Relying on reason Relating new ideas to old ones Taking notes
Rule for recording expenses
Record increases in expenses on the left (debit) side of the Expense T-account and decreases on the right (credit) side. The reasoning behind this rule is that expenses decrease retained earnings, and decreases in retained earnings are recorded on the left side of the Retained Earnings T-account.
Rule for recording Revenues
Record increases in revenues on the right (credit) side of the Revenue T-account and decreases on the left (debit) side. The reasoning behind this rule is that revenues increase retained earnings, and increases in retained earnings are recorded on the right side of the Retained Earnings T-account.
What does double-entry accounting refer to?
Recording equal debits and credits for each transaction
Cash Basis Accounting
Reporting income when the cash is received and expenses when the cash is paid.
When are revenue and expenses recognized in accrual basis accounting?
Revenue is recognized when earned, and expenses are recognized when incurred.
SEC
Securities and Exchange Commission Federal agency that holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States. Has the authority to prescribe accounting and reporting practices for companies under its jurisdiction
Uncollectible Accounts Recovered
Sometimes, a company learns that an account that has been written off receives payment. The company reverses the original write-off entry and reinstates the account by debiting Accounts Receivable and crediting Allowance for Uncollectible Accounts for the amount received. It posts the debit to both the general ledger account and to the customer's accounts receivable subsidiary ledger account. The firm also records the amount received as a debit to Cash and a credit to Accounts Receivable. And it posts the credit to both the general ledger and to the customer's accounts receivable subsidiary ledger account.
comparative financial statements
Statement with data for two or more successive periods placed in side-by-side columns, often with changes shown in dollar amounts and percents.
debt to equity ratio
Stockholders' equity / Total debt Measure of the relative proportion of stockholders' and of creditors' equities
Steps in Recording Business Transactions
The company enters into a business transaction as the result of a management decision. The company transaction is evidenced to be a source document. The source document sources as the basis for preparing an entry to record the transaction. The entry is posted to the respective accounts in the ledger
General Journal vs General Ledger
The difference between a general ledger and the general journal is that the general journal is considered the initial book of entry. The general ledger and general journal help create a double-entry bookkeeping record system, which is used to record financial transactions
Clearly determinable liabilities
The existence of the liability and its amount are certain. Examples include liabilities like accounts payable, notes payable, interest payable, and wages payable. Sales taxes payable, federal and state income taxes payable, current portions of long-term debt, and payroll liabilities are other examples.
Estimated Liabilities
The existence of the liability is certain, but its amount only can be estimated. An example is estimated product warranties where the company knows that it will have warranty claims from customers. The actual amount of the claims is not known; therefore, the company uses a formula to calculate the anticipated warranty claims amounts.
Contingent Liability
The existence of the liability is uncertain and usually the amount is uncertain because contingent liabilities depend (or are contingent) on some future event occurring or not occurring. if the liability is probable and the amount can be reasonably estimated, companies should record this liability in the accounts. Examples include liabilities arising from lawsuits, discounted notes receivable, income tax disputes, penalties that may be assessed because of some past action, and failure of another party to pay a debt that a company has guaranteed.
Cross-indexing
The placing of (1) the account number of the ledger account in the general journal and (2) the general journal page number in the ledger account.
Double Entry Accounting
The recording of debit and credit parts of a transaction
How can potential creditors use financial statement analysis?
To determine a company's ability to pay short-term debts
How would an employee labor union use financial accounting information?
To determine ability to pay an increase in wages
Jan, a sales representative in a manufacturing company, is discussing the recent announcement of layoffs due to a reduction in product demand. Little information has been circulated by management regarding which departments will be affected. Jan has begun telling coworkers that employees in the sales department will be impacted first because that is what happened at her last job at a pharmaceutical company. Why is Jan's statement considered an assumption?
The statement is unsupported by communication from management.
How would a bank use financial accounting information?
To approve lines of credit
accumulated depreciation account
a contra asset account that shows the total of all depreciation recorded on the asset from the date of acquisition up through the balance sheet date.
Stockholders' Equity
a corporation's assets minus its liabilities ex: capital retained earnings, treasury stock, revenue, dividends, common stock
contra asset account
a deduction from the asset to which it relates in the balance sheet. The purpose of a contra asset account is to reduce the original cost of the asset down to its remaining undepreciated cost or book value. an asset account where the balance will be either a credit balance or a zero balance.
statement of stockholders' equity
a financial statement that shows changes in a corporation's ownership for a fiscal period
statement of stockholders' equity
a financial statement that shows changes in a corporation's ownership for a fiscal period includes common stock, Paid-in capital, retined earnings, and treasury stock
Business Letter
a formal letter and legal document
special journal
a journal used to record only one kind of transaction
Current Ratio
a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To gauge this ability, the current ratio considers the current total assets of a company (both liquid and liquid) relative to that company's current total liabilities current assets divided by current liabilities
chart of accounts
a list of accounts used by a business usually in this order: ASSETS LIABILITIES STOCKHOLDER'S EQUITY DIVIDENDS REVENUES EXPENSES
Trial Balance
a listing of the ledger accounts and their debit or credit balances to determine that total debits equal total credits in the recording process. usually in this order ASSETS LIABILITIES STOCKHOLDER'S EQUITY DIVIDENDS REVENUES EXPENSES
Prepaid Insurance
advance payment is an asset because the company will receive insurance coverage in the future as a result of this insurance policy payment. With the passage of time, however, the asset, prepaid insurance, gradually expires. The portion that has expired becomes an expense.
Notes Payable
also called a promissory note, is an unconditional written promise by a borrower (maker) to pay a definite sum of money to the lender (payee) on demand or on a specific date. May carry interest charge
net realizable value
amount the company expects to collect from accounts receivable after uncollectible accounts are taken into consideration
Accounts Payable
amounts owed to suppliers for purchases made on credit. Accounts payable normally result from the purchase of goods or services and do not carry an interest charge.
Accounts Receivable
amounts that customers owe a company for goods sold and services rendered on account
prepaid expense
an asset whose value has expired or partially expired during the accounting period, such as prepaid insurance, prepaid rent, and supplies on hand.
Horizontal Analysis
analysis of financial statements that compares account values reported on these statements over two or more years to identify changes and trends
accrued assets
assets, such as interest receivable or accounts receivable, that have not been recorded by the end of an accounting period.
Ledger accounts in a general ledger, fall into two general groups:
balance sheet accounts (assets, liabilities, and stockholders' equity) income statement accounts (revenues and expenses)
4 Basic Financial Statements
balance sheet, income statement, statement of stockholders equity, statement of cash flows
What is an example of recurring income?
bank account interest Recurring revenue is the portion of a company's revenue that is highly likely to continue in the future. Recurring revenue is revenue that is predictable, stable and can be counted on in the future with a high degree of certainty.
Classified Balance Sheet
contains assets, liabilities, and equity accounts but importantly breaks up assets and liabilities into current and non-current assets and liabilities.
types of liquidity?
current ratio acid test (quick ratio)
2 classes of Adjusting entries
deferred (meaning to postpone or delay) items accrued (meaning to grow or accumulate) items.
budgeting process steps
defining goals and gathering data forming expectations and reconciling goals and data creating the budget monitoring actual outcomes and analyzing discrepancies adjusting budget, expectations, or goals redefining goals.
types of leverage
equity ratio debt to equity ratio
percentage-of-receivables method
estimates uncollectible accounts by determining the desired size of the Allowance for Uncollectible Accounts.
estimated residual value
expected cash value of an asset at the end of its useful life
ratio analysis
expressions of logical relationships between items in the financial statements of a single period
Informative presentation
focus on helping the audience to understand a topic, issue, or technique more clearly. As you present technical information it is important to make eye contact, offer alternative explanations, and allow the audience to ask questions if you feel like you are losing their attention. As you present visuals, consider providing handouts to the audience and allowing them to look over the material more closely.
T-Account
illustrates recording the increases and decreases in an account. The name of the account, such as Cash, appears across the top of the T. We record increases on one side of the vertical line of the T and decreases on the other side for asset accounts like cash.
Recurring Expenditures
include living expenses, loan repayments, and regular savings or investment deposits.
mandatory payroll deductions
include state and federal income taxes, social security taxes, and Medicare taxes. These taxes are deducted from worker's paychecks.
Payroll Liabilities
include taxes and other amounts withheld from employees' paychecks and taxes paid by employers. Employers must remit these amounts withheld from your paycheck to the various federal and state government jurisdictions.
Participatory Decision Making
is the extent to which employers allow or encourage employees to share or participate in organizational decision-making
Democratic Decision Making
is when the leader gives up ownership and control of a decision and allows the group to vote. Majority vote will decide the action.
Nonrecurring expenditures
large improvements such as a new car, roof or refridgerator
Autocratic Decision Making
leaders make the decision alone without necessarily involving employees in the decision-making process
return on sales
net income/net sales Indicator of the amount of net profit on each dollar of sales
return on assets
net income/total assets Effectiveness of the use of assets in generating income
Income statement accounts are
nominal accounts- they are merely sub classifications of the stockholders' equity accounts. temporary accounts- they temporarily contain revenue, expense, and dividend information that is transferred (or closed) to the Retained Earnings account at the end of the accounting period.
Current Liabilities
obligations that (1) are payable within one year or one operating cycle, whichever is longer, or (2) will be paid out of current assets or create other current liabilities.
Long-term liabilities (long-term debt)
obligations that do not qualify as current liabilities and require repayment sometime after the next 12 months or operating cycle.
Ledger
the group of accounts maintained by a company
How is the body of a memo organized?
purpose of the document in the first paragraph (sometimes the first sentence) supporting details in the body Action information (such as deadlines or contact information) or a courteous closing statement is placed in the last paragraph.
Balance sheet accounts are
real accounts- not sub classifications or subdivisions of any other account. permanent accounts- balances are not transferred (or closed) to any other account at the end of the accounting period.
Vertical Analysis
reporting an amount on a financial statement as a percentage of another item on the same financial statement
Accrual Basis Accounting
reporting income when it is earned and expenses when they are incurred regardless of when cash is received
types of profitability?
return on assets return on sales earnings per share of common stock
Accrued Revenues
revenues for services performed but not yet received in cash or recorded
trend percentages
similar to horizontal analysis except that comparisons are made to a selected base year or period.
Liquidity
state of possessing liquid assets, such as cash and other assets easily converted to cash measures how soon a company can convert assets to cash in order to pay liabilities that come due.
Stockholder's Equity Equation
stockholder's equity= assets- liabilities
Profitability
the ability of a company to generate income; profitability is measured by analyzing the company's income statement.
Solvency
the ability of a company to pay its debts as they come due; solvency is measured by analyzing the balance sheet
Expenses
the cost required for something; the money spent on something. ex- Car repair expense, travel and entertainment expense, Salary expense, Misc. expense
Estimated useful life
the expected service life of an asset to the present owner
Asset
things owned and prepaid or deferred expenses. ex: Cash, Accounts Receivable, Supplies, Equipment, Inventory, Property, Plant and Equipment, prepaid insurance, vehicles, furnishings
equity ratio
total equity/total assets Index of long-run solvency and safety
what does the closing process at the end of the financial year do?
transfers the balances in the revenue and expense accounts to a clearing account called Income Summary and then to Retained Earnings transfers the balance in the Dividends account to the Retained Earnings account.
Business reports
used as a way of communicating to other businesses and investors the successes and future plans of the company use visuals
Worksheet
used to prepare financial documents. A computerized spreadsheet in Excel.
