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193 Cards in this Set
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- Back
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accounting
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the information system that measures business activiteis, processes the information into reports, and communicates the results to decision maker
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accounting equation
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the basic tool of accounting, measuring the resources of the business (what the business owns or has control of ) and the claims to those resources (what the business owes to creditors and to the owner)
Assets=Liabilities+Equity |
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accounts payable
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a short term liability that will be paid in the future
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accounts recievable
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the right to recieve cash in the future from customers for goods sold or for services performed
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assets
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economic resources that are expected to benefit the business in the future, something the business owns or has control of
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audit
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an examination of a companies financial statements and records
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balance sheet
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reports on the assets liabilities and owners equity of the business as of a specific date
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Certified Management Accountants (CMA's)
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certified professionals who specialize in accounting and financial management knowledge. they typically work for a single company
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Certified Public Accountants (CPAs)
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licensed professional accountants who serve the general public
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corporation
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a business organized under state law that is a seperate legal entity
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cost principle
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a principle that states that acquired assets and services should be recorded at their actual cost
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creditor
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any person or business to whom a business owes money
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economic entity assumption
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an organization that stands apart as a separate economic unit
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equity
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the owners claim to the assets of the business
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expenses
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the cost of selling goods or services
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financial accounting
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the field of accounting that focuses on providing information for external decision makers
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financial accounting standards board (FASB)
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the private organization that overseas the creation and governance of the accounting standards in the USA
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financial statements
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business dociments that are used to communicate information needed to make business decisions
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Generally Accepted Accounting principles (GAAP)
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acconting guielines, currently formulated by the (FASB), the main US accounting rulebook
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Going concern assumption
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assumes that the entity will remain in operation for the foreseeable future
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income statement
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reports the net income or net loss of the business for a specific period
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international accounting standards board (IASB)
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the private organization that oversees the creation and governance of international financial reporting standards (IFRS)
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International financial reporting standards (IFRS)
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a set of global accounting guidelines, formilated by the IASB
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liabilities
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debts that are owed to creditors
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limited liability company (LLC)
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a company in which each member is only liable for his or her own actions
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managerial accounting
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the field of accounting that focuses on providing information for internal decision makers
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monetary unity assumptions
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the assumption that requires the items on the financial statements to be measured in terms of a monetary unit
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net income
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the result of operations that occurs when total revenues are greater than total expenses
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net loss
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the result of operations tat occurs when total expenes are greater than total revenues
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owners capital
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owner contributions to a business
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owners withdrawals
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payments of equity to the owner
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partnership
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a business with two or more owners and not organized as a corporation
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return on assets (ROA)
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measures how profitably a company uses its assets.
NET INCOME / AVERAGE TOTAL ASSETS |
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revenues
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amounts earned from delivering goods or services to customers
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sarbanes- oxley act (SOX)
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requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports
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securities and exchange comission (SEC)
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US governmental agency that oversees the US financial markets
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sole proprietorship
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a business with a single owner
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statement of cash flows
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reports on a businesses cash receipts and cash payments for a specific period
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statement of owners equity
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shows the changes in the owners capital account for a specific period
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transaction
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an event that affects the financial position of the business and can be measured reliably in dollar amount
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accounting is the information system that
A) measures business activities B) communicates the results to decision makers C) processes information into reports D) all of the above |
D All of the above
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which of the following is not an external user of a business's financial info
A) taxing authorities B) customers C) employee D) investors |
C employee
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generally accepted accounting principles (GAAP) are currently formulated by the
A financial accounting standards board (FASB) B securities and exchange commission (SEC) C institute of management accountants (IMA) D American institute of certified public accountants (AICPA) |
A financial accounting standards board (FASB)
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which type of business organization is owned by only one owner
A corporation B partnership C sole proprietorship D all of the above |
C sole proprietorship
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which of the following characteristics best describes a corporation
A a business with a single owner B is not taxed C stockholders not personally liable for entities debts D not a separate taxable entity |
C Stockholders not perosially liable for entites debts
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which of the following requires accounting nfo to be complete, neural, and free from material error?
A faithful representation concept B cost principle C economic entity assumption D going concern assumption |
A Faithful representation concept
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at the end of a recent year, Global Cleaning Service, a full service house and office cleaning service, had total assets of $3,630 and equity of $2,280. how much were global cleaning services liabilities
A $5,910 B $3,630 C $1,350 D $2,280 |
C $1,350
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consider the overall effects on Global Cleaning Service from selling and performing services on account for $6,400 and paying expenses totaling $2,500. what is GCS's net income or net loss
A net income of $3,900 B net loss of $3,900 C net income of $6,400 D net income of $8,900 |
A a net income of $3,900
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assume that GCS performed cleaning services for a department store on account for $180. how would this transaction affect GC's accounting equation
A increase both assets and liabilities by $180 B increase both assets and equity by $180 C increase both liabilities and equity by $180 D decease liabilities by $180 and increase equity by $180 |
B increase both assets and equity by $180
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the balance sheet reports the
A financial position on a specific date B result of operations on a specific date C financial position for a specific date D results of operations for a specific date |
A financial position on a specific date
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assume GCS had net income of $570 for the year. GCS's beginning and ending total assets were $4,520 and $4,180 respectively. calculate GCS's return on assets
A 12.6% B 13.6% C13.1% D 7.63% |
C 13.1%
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account
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a detailed record of all increases and decreases that have occurred in an individual asset, liability, or equity during a specific period
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accrued liability
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a liability for which the business knows the amount owed but the ill has not been paid
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chart of accounts
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a list of all of a company's accounts with their account numbers
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compound journal entry
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a journal entry that is characterized by having multiple debits and or multiple credits
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credit
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the right side of a t-account
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debit
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the let side of a t-account
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debt ratio
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shows the proportion of assets financed with debt.
TOTAL LIABILITIES / TOTAL ASSETS |
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double entry system
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a system of accounting in which every transaction affect at least two accounts
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journal
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a record of transactions in date order
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ledger
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the record holding all the accounts of a business, the changes in those accounts, and their balances
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normal balance
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the balance that appears on the increase side of an account
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notes recievable
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a written promise that a customer will pay a fixed amount of money and interest by a certain date in the future
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notes payable
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a written promise made by the business to pay a debt, usually involving interest, in the future
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posting
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transferring data from the journal to the ledger
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prepaid expense
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a payment of an expense in advance
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source document
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provides the evidence and data for accounting transactions
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t-account
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a summary device that is shaped like a capital T with debits posted on the left and credits on the right of the vertical line
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trial balance
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a list of all the ledger accounts with their balances at a point in time
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unearned revenue
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a liability created when a business collects cash from customers in advance of providing services or delivering goods
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the detailed record of the changes in a particular asset, liability or owners equity is called
A an account B a journal C a ledger D a trial balance |
A an account
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which of the following accounts is a liability?
A accounts receivable B service revenue C unearned revenue D prepaid rent expense |
C unearned revenue
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the left side of an account is used to record which type of the following
A debit or credit, depending on the type of account B increases C credits D debits |
D debits
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which of the following statements is correct
A prepaid expenses are decreased with a debit B unearned revenue is is increased with a debit C rent expense is increased with a credit D accounts payable is increased with a credit |
D accounts payable is increased with a credit
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pixel copies recorded a cash collection on account by debiting cash and crediting accounts payabe, what will the trial balance show for this error?
A cash is overstated B liablilities are overstated C expenses are overstated D the trial balance will not balance |
B liabilities are overstated
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which sequence correctly summerizes the accounting process
A journalize transactions, post to accounts, prepare trial balance B journalize transactions, prepare trial balance, post to accounts C post to accounts, journalize transactions, prepare trial balance D prepare trial balance, journalize transactions, post to accounts |
A journalize transactions, post to accounts, prepare trial balance
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nathville laundry reported assets of $800 and equity of $480, what is nathville's debt ratio
A 60% B 40% C 67% D not enough info provided |
B 40%
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accrual basis accounting
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accounting method that records revenues when earned and expenses when incurred
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accrued expense
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an expense that the business has incurred but has not yet paid
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accrued revenue
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a revenue that has been earned but for which the cash has not yet been collected
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accumulated depreciation
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the sum of all the depreciation expense recorded to date for a depreciable asset
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adjusted trial balance
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a list of all the accounts with their adjusted balances
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adjusting entry
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an entry made at the end of the accounting period that is used to record revenues to the period in which they are earned and expenses to the period which they occur
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book value
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a depreciable asset's cost minus accumulated depreciation
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cash basis accounting
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accounting method that records revenue only when cash is received and expenses only when cash is paid
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contra account
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an account that is paired with, and is listed immediately after, its related account in the chart of accounts in the chart of accounts and associated financial statement, and whose normal balance is the opposite of the normal balance of the related account
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deferred revenue
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a liability created when a business collects cash from customers in advance of completing a service or delivering product
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depreciation
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the process by which businesses spread the allocation of a plant asset's cost over its useful life
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fiscal year
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an ccounting year of any twelve consecutive months that may or may not coincide with the calender year
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matching principle
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guides accounting for expenses, ensures that all expenses are recorded when they are incurred during the period, and matches those expeneses against the revenues of the period
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plant assets
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long-lived, tangable assets, such as land, buildings, and equipment, used in the operation of a business
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residual value
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the value of a depreciable asset at the end of its useful life
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revenue recognition principle
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requires companies to record revenue when it has been earned and determines the amount of revenue to record
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straight line method
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a depreciation method that allocates an equal amount of depreciation each year
(COST -- RESIDUAL VALUE) / USEFUL LIFE |
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time period concept
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assumes that a business activites can be sliced into small time segments and that financial statements can be prepared for specific periods, such as a month, quarter, or year
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worksheet
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an internal document that helps summarize data for the preparation of financial statements
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which of the following is true of accrual basis accounting and cash basis accounting
A accrual accounting records revenue only when it is earned B accrual accounting is not allowed under GAAP C cash basis accounting records all transactions D all the above are true |
A accrual accounting records revenue only when it is earned
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get fit now gains a client prepays $540 for a package of six physical training sessions. GFN collects the 540 in advance and will provide the training later, after four training sessions, what should GFN report on its income statement assuming it uses the accrual basis accounting method?
A service revenue of 360 B service revenue of 540 C uneasrned service revenue of 360 D cash of 180 |
A service revenue of 360
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the revenue recognition principle requires
A time to be divided into annual periods to measuer revenue properly B revenue to be recorded only after the business has earned it C expenses to be matched with revenue of the period revenue to be recorded only after the cash is recieved |
B revenue to be recoreded only after the business has earned it
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adjusting re accounts is the process of
A subtracting expenses from revenues to measure net income B recording transactions as they occur during the period C updating the accounts at the end of the period D zeroing out accout balances to prepare for the next period |
C updating the accounts at the end of the period
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which of the following is an example of a prepaid adjusting entry
A recording the usage of office supplies during the period B recording salaries expense for employees not yet paid C recording revenue that has been earned but not yet recieved D recording interest expense incurred on a nots payable not due until next year |
A recording the usage of office supplies during the period
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the adjustment trial balance shows
A amounts that may be out of balance B account balances after adjustments assets and liablilities only D revenues and expenses only |
B account balances after adjustments
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a and d window cleaning preformed 450 of services but has not yet billed customers for the month. if a and d fails to record the adjusting entry what is the impact on the financial statements
A balance sheet: assets understated; equity overstated. income statement: expense understated B Balance shee: liabilities overstated; equity understated. income statement: revenues understate C balance sheet: assets overstated, equity understated. income statement: expenses understated D balance sheet: assets understated, equity understated. income statement: revenues understated |
D balance sheet: assets understated, equity understated. income statement: revenues understated
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a worksheet
A is a journal used to record transactions B is a financial statement that reports net income during the period C is an internal document that helps summarize data for the preparation of financial statements D is a ledger listing the acount balances and changes in those accounts |
C is an internal document that helps summarize data for the preparation of financial statements
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accounting cycle
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the process by which companies produce their financial statements for a specific period
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classified balance sheet
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a balance sheet that places each asset and each liability into a specific category
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closing entries
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entries that transfer the revenue, expense, and withdrawal balances to the capital account to prepare the companies books for the next period
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closing process
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a stepin the accounting cycle that occurs at the end of the period. the closing process consists of journalizing and posting the closing entries to set the balances of the revenue, expense, and withdrawal accounts to zero for the next period
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current assets
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assets that are epected to be converted to cash, sold, or used up during the next 12 months, or within the businesses normal operating cycle if the cycle is longer than a year
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current liabilities
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liabilities that must be paid with cash or with goods and services within one year, or within the entitys operating cycle if the cycle is longer than a year
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current ratio
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measuers the comanies ability to pay current liabilities from current assets.
TOTAL CURRENT ASSETS / TOTAL CURRENT LIABILITIES |
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income summary
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a temporary account into which revenues and expenses are transferred prior to their final transfer into the capital account. summarizes net income (or net loss) for the period
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intangible assets
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a long-term asset category that includes assets with no physical form, such as patents, copyrights, and trademarks
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liquidity
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a measuer of how quickly an item can be converted into cash
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long-term assets
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all assets that will not be converted to cash or used up within the businesses operating cycle or one year, whichever is greater
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long term invesments
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a long term asset category that includes investments in bonds or stocks in which the company intends to hold the investment for longer than one year
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long term liabilities
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liabilities that do not need to be paid within one year or within the entities operating cycle, whichever is greater
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operating cycle
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the time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash
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permanent account
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an account that is not closed at the end of the period. the asset, liability, and capital accounts.
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plant assets
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a long term asset category that includes property, plant, and equipment
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post closing trial balance
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a list of of the accounts and their balances at the end of the period ater journalizing and posting the closing entries, it should include only permanent accounts
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reversing entity
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a special journal entry that eases the burden of accounting for transactions in the next period. such entries are the exact opposite of a prior adjusting entry
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temporary account
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an account that relates to a particular accounting period and is closed at the end of that period. the revenues, expenses and withdrawal accounts
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assets and liabilities are listed on the balance sheet in order of their
A purchase date B adjustments C liquidity D balance |
C
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which of the following accounts would be included in the plant assets category of the classified balance sheet
A land held for investment B accumulated depreciation C office supplies D mortgage payable |
B
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which situation indicates a net loss within the income statement section of the worksheet
A total credits exceed total debits B total debits exceed total credits C total debits equal total credits D none of the above |
B
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which of the following accounts is not closed
A depreciation expense B withdrawals C service revenue D accumulated depreciation |
D
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what do closing entries accomplish
A zero out the revenues, expenses, and withdrawals B transfer revenues, expenses, and withdrawals to the capital account C bring the capital account to its correct ending balance D all of the above |
D
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which of the folliwing accounts may appear on a post closing trial balance
A cash, salaries payable, and capital B cash, salaries payable, and service revenue C cash, service revenue, and salaries expense D cash, salaries payable, and salaries expense |
A
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which of the following steps of the accounting cycle is not completed at the end of the period
A journalize transactions as they occur B journalize and post the closing entries C prepare the post closing trial balance D prepare the financial statements |
A
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clean water softner systems has cash of $600, accounts recievable of 900, and office supplies of 400. Clean owes 500 on accounts payable and salaries payable of 200. cleans current ratio is
A 2.71 B 2.50 C 0.63 D 0.37 |
A
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which of the followinf statements concerning reversing entries is true
A reversing entries are required by generally accepted accounting principles B reversing entries are most often used with accrual type adjustments C reversing entries are dated December 31 D reversing entries are recorded before adjusting entries |
`B
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administrative expenses
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expenses incurred that are not related to marketing the companies products
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cost of goods sold (COGS)
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the cost of the merchandise inventory that the business has sold to customers
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credit terms
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the payment terms of purchase or sale as stated on the invoice
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FOB destination
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situation in which the buyer takes onwership (title) to the goods at the delivery destination point and the seller typically pays the freight
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FOB shipping point
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situation in which the buyer takes ownership (title) to the goods after the goods leave the sellers place of business (shipping point) and the buyer typically pays the freight
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freight in
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the transportation cost to ship good into the purchasers warehouse; therefore it is freight on purchased goods
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freight out
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the transportation cost to ship goods out of the seller's warehouse; therefore, it is freight on goods sold to customer
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gross profit
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excess of net sales revenue over cost of goods sold
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gross profit percentage
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measures the profitability of each sales dollar above the cost of goods sold.
GROSS PROFIT / NET SALES REVENUE |
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inventory shrinkage
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the loss of inventory that occurs because of theft, damage, and errors
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invoice
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a seller's reuet for payment from the purchaser
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merchandise inventory
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the merchandise that a business sells to customers
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merchandiser
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a business that sells merchandise, or goods, to customers
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multi step income statement
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income statement format that contains subtotals to highlight significant relationships. in addition to net income, it reports gross profit and operating income
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net purchases
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purchases less purchase returns and allowances less purchase discounts
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net sales revenue
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the amount a company has made on sales of merchandiser inventory after returns, allowances, and discounts have been taken out. sales revenue less sales returns and allowances and sales discounts
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operating expenses
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expenses, other than COGS, that are incurred in the entities major line of business
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operating income
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measures the results of the entities major ongoing activities. gross profit minus operating expenses
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other revenues and expenses
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revenues or expenses that are outside the normal, day to day operations of a bysiness, such as a gain or loss on the sale of plant assets or interest expense
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periodic inventory system
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an inventory system that requires businesses to obtain a physical count of inventory to determine quantities on hand
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perpetual inventory system
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an inventory system that keeps a running computerized record of merchandise inventory
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purchase allowance
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an amount granted to the purchaser as an incentive to keep goods that are not "as ordered"
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purchase discount
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a discount that businesses offer to purchasers as an incentive for early payment
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purchase return
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a situation in which sellers allow purchasers to return merchandise that is defective, damaged, or otherwise unsuitable
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retailer
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a type of merchandiser that buys merchandise either from a manufacturer or a wholesaler and then sells those goods to consumers
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sales discounts
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reduction in the amount of cash received from a customer for early payment
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sales returns and allowances
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decreases in the sellers reveivable from a customers return of merchandise or from granting the customers an allowance from the amount owed to the seller
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sales revenue
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the amount that a merchandiser earns from selling its inventory
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selling expenses
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expenses related to marketing and selling the companies products
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single step income statement
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income statement format that groups all revenues together and then lists and deducts all expenses togeher without calculating any subtotals
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vender
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the individual or business from whom a company purchases goods
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wholesaler
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a type of merchandiser that buys goods from manufactuers and then sells them to retailers
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which account does a merchandiser use that a service compnay does not use
A COGS B merchandise inventory C sales revenue D all of the above |
D all of the above
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the two main inventory accounting systems are the
A perpetual inventory system B purchase and sale C returns and alowances D cash ad accrual |
A perpetual inventory system
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JC manufacturing purchased inventory for 5300 and also paid a 260 freight bill. JC returned 45% of the goods to the seller and later took a 2% purchase discount. assume JC uses a perpetual inventory system. what is JC's final cost of the inventory that it kept? round to nearest whole number
A 2997 B 2337 C 3117 D 2857 |
C 3,117
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suppose Austin Sound had sales of 300,000 and sales returns of 45,000. COGS was 152,000. how much gross profit did austin sound report
A 148,000 B 103,000 C 255,000 D 88,000 |
B 103,000
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which of the following accounts would be closed at the end of the year using the perpetual inventory system
A COGS B merchandise inventory C accounts recievable D accounts payable |
A COGS
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what is the order of the subtotals that appear on a multi step income statement
A gross profit, operating income, net income, other revenues and expenses B operating income, gross profit, net income, other revenues and expenses C other revenues and expenses, operating income, gross profit, net income D gross profit, operating income, other revenues and expenses, net income |
D gross profit, operating income, other revenues and expenses, net income
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assume Juniper Natural Dyes made sales revenue of 90,000 and COGS totaled 58,000. what was JND's gross profit percentage for this period? round to nearest whole percent
A 36% B 3.4 times C 64% D 17% |
A 36%
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conservatism
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a business should report the least favorable figures in the financial statements when two or more possible options are presented
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consistency principle
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a business should use the same accounting methods and procedures from period to period
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cost of goods available for sale
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the total cost spent on inventory that was available to be sold during a period
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days sales in inventory
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measures the average number of days that inventory is held by a company.
365 DAYS / INVENTORY TURNOVER |
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disclosure principle
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a business's financial statements must report enough info for outsiders to make knowledgable decisions about the company
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(FIFO) first in first out method
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an inventory costing method in which the first costs into inventory are the first costs out to costs of goods sold. ending inventory is based on the costs of the most recent purchases
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gross profit method
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a way to estimate ending merchandise inventory on the basis of the cost of goods sold formula and the gross profit percentage
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inventory costing method
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a method of approximating the flow of inventory costs in a business that is used to determine the amount of COGS and ending merchandise inventory
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inventory turnover
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measures the number of times a company sells its average level of merchandise inventory during a period.
COGS / AVERAGE MERCHANDISE INVENTORY |
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(LIFO) last in first out method
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an inventory costing method in which the last costs into inventory are the first costs out to cost of goods sold. the method leaves the oldest costs- those of beginning inventory and the earliest purchases of the period- in ending inventory
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lower of cost or market rule (LCM)
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rule that merchandise inventory should be reported in the financial statements at whichever is lower- its historical cost or its market value
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materiality concept
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a company must perform strictly proper accounting only for items that are significant to the business's financial situation
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retail method
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a way to estimate the cost of ending merchandise inventory on the basis of the ratio of the goods available for sale at cost to the goods available for sale at retail
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specific identification method
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an inventory costing method based on the specific cost of particular units of inventory
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weighted average method
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an inventory costing method based on the weighted average cost per unit of inventory that is calculated after each purchase. weighted average cost per unit is determined by dividing the cost of goods available for sale by the number of units available
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which pprinciple or concept states that businesses shoulduse the same accounting methods and procedures from period to period?
A disclosure B conservatism C consistency D materiality |
C consistency
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which inventory costing method assigns to ending merchandise inventory the newest-most recent- costs incurred during the period
A FIFO B weighted average C Specific Identification D LIFO |
A FIFO
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which inventory costing method results in the lowest net income during a perod of rising inventory costs
A weighted average B specific identification C FIFO D LIFO |
D LIFO
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which of the following is most closely linke to accounting conservatism
A lower of cost or market rule B materiality concept C disclosure principal D consistancy principle |
A lower of cost or market rule
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at devember 31, 2015 SC overstated ending inventory by 36,000. how does this error affect COGS and net income for 2015
A overstates COGS and understates net income B understates COGS and overstates net income C leaves both correct because the errors cancel each other D overstates both |
B understates COGS and overstates net income
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suppose M's had COGS during the year of 230,000. Beginning merchandise inventory was 35,000 and ending merchandise inventory 45,000. determine M's inventory turnover for the year. round to nearest hundredth.
A 6.57 times per year B 5.75 times per year C 5.11 times per year D 17.39 times per year |
B 5.75 times per year
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suppose SC suffered a hurricane loss and needs to estimate the COG destroyed. beginning inventory was 94,000, net cost of purchases totaled 564,000, and sales came to 940,000. supreme's normal gross profit percentage is 55%. use the gross profit method to estimatethe cost of the inventory lst in the hurricane
A 658,000 B 235,000 C 517,000 D 141,000 |
B 235,000
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