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31 Cards in this Set
- Front
- Back
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What % is Financial Accounting?
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60-70% Financial accounting
(concerned with providing financial statements and reports of interest to company managers as well as bankers, investors, and other outsiders who must make a financial assessment of a company) • Generally accepted accounting principles • Rules of double-entry accounting • The accounting cycle • Presentation of and relationships between general-purpose financial statements • Valuation of accounts and notes receivable • Valuation of inventories • Initial costs of plant assets • Depreciation • Liabilities • Investments • Capital • Cash and stock dividends • Treasury stock • Purchase and sale of merchandise • Revenue and cost apportionments • Cash control • Division of profits and losses in partnership accounting • Cash flow analysis |
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What % is Managerial Accounting?
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30-40% Managerial accounting
(concerned with the use of accounting data for internal purposes to help management in planning and controlling functions in a company) • Analysis of departmental operations • Budgeting • Cost-volume profit (break-even) analysis • Direct costing and absorption costing • Financial statement analysis • Performance evaluation • Process and job-order systems • Standard costs and variances • The manufacturing environment • Use of differential (relevant) cost |
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1. In accounting, net income should be defined as
an increase in? (A) assets (B) cash (C) merchandise (D) sales (E) capital |
(E) capital
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2. What is the number of days’ inventory on hand for a firm with cost of goods sold of $750,000
and average ending inventory of $150,000? (A) 5 (B) 10 (C) 20 (D) 50 (E) 73 |
(E) 73
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3. During the current year, accounts receivable increased from $27,000 to $41,000, while sales
remained constant at $225,000. Based on this information, how much cash did the company collect from its customers during the year? (A) $225,000 (B) $239,000 (C) $211,000 (D) $252,000 (E) $266,000 |
(C) $211,000
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4. Accounts receivable turnover helps determine
(A) the balance of accounts payable (B) customers who have recently paid their bills (C) how quickly a firm collects cash on its credit sales (D) when to write off delinquent accounts (E) credit sales |
(C) how quickly a firm collects cash on its credit sales
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5. The income statement is designed to measure
(A) whether a firm is able to pay its bills (B) how solvent a company has been (C) how much cash flow a firm is likely to generate (D) the financial position of a firm (E) the results of business operations |
5. E
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6. A company prepares a bank reconciliation in
order to (A) determine the correct amount of the cash balance (B) satisfy banking regulations (C) determine deposits not yet recorded by the bank (D) double-check the amount of petty cash (E) record all check disbursements |
6. A
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7. An inventory valuation method usually affects
(A) the cost of goods sold but not the balance sheet (B) the balance sheet but not the cost of goods sold (C) both the income statement and the balance sheet (D) neither the income statement nor the balance sheet (E) the employment level of the company |
7. C
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8. A liability for dividends is recorded on which of
the following? (A) The declaration date (B) The record date (C) The payment date (D) The collection date (E) The statement date |
8. A
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9. Assets are classified as intangible under which
of the following conditions? (A) They are converted into cash within one year. (B) They have no physical substance. (C) They are acquired in a merger. (D) They are long term and used in operations. (E) They are short term and used in operations. |
9. B
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9. Assets are classified as intangible under which
of the following conditions? (A) They are converted into cash within one year. (B) They have no physical substance. (C) They are acquired in a merger. (D) They are long term and used in operations. (E) They are short term and used in operations. |
9. B
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10. Ace Rackets manufactures tennis rackets that
usually sell for $75. Ace has 200 defective rackets that have $30 of materials, labor, and overhead assigned to each racket. The defective rackets can be sold for $20 or completely repaired at a cost of $30. Ace would be better off by which of the following amounts if it chose the most profitable course of action? (A) $2,000 (B) $4,000 (C) $5,000 (D) $6,000 (E) $9,000 |
10. C
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11. Return on assets helps users of financial statements
evaluate which of the following? (A) Profitability (B) Liquidity (C) Solvency (D) Cash flow (E) Reliability |
11. A
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12. The accounting concept that emphasizes the
existence of a business firm separate and apart from its owners is ordinarily termed the (A) business separation concept (B) consistency concept (C) going-concern concept (D) business materiality concept (E) business entity concept |
12. E
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13. Which of the following standard cost variances
provides information about the extent to which the manufacturing plant of a company was used at normal capacity? (A) Materials quantity (usage) variance (B) Labor efficiency (time) variance (C) Labor rate variance (D) Overhead spending (controllable) variance (E) Overhead volume variance |
13. E
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14. The financial statement that includes classifications for operating, financing, and investing
activities of a business entity for a period of time is called the (A) Income Statement (B) Statement of Retained Earnings (C) Balance Sheet (D) Statement of Changes in Owners’ Equity (E) Statement of Cash Flows |
14. E
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15. In a period of rising prices, which of the following inventory methods results in the highest cost
of goods sold? (A) FIFO (B) LIFO (C) Average cost (D) Periodic inventory (E) Perpetual inventory |
15. B
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16. Treasury stock may be correctly defined as
(A) a corporation’s own stock that has been issued and then reacquired (B) new issues of a corporation’s stock before they are sold on the open market (C) stock issued by the United States Office of the Treasury (D) any stock that a corporation acquires and holds for more than 90 days (E) any stock held by a corporation that receives dividends in excess of 5% of initial cost of the stock |
16. A
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17. Which of the following is true about international
accounting standards? (A) All companies use the same accounting principles for financial reporting regardless of where they report their information. (B) Foreign currency differences do not impact financial reports of international firms. (C) Exchange rates are used to convert one currency into another for certain reporting requirements. (D) It is easy to compare the financial statements of companies operating in different countries. (E) The Financial Accounting Standards Board (FASB) is responsible for international accounting standards. |
17. C
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18. Beckett Corporation reported net sales of
$500,000, $550,000, and $600,000 in the years 1998, 1999, and 2000, respectively. What is the trend percentage if 1998 is the base year? (A) 83% (B) 92% (C) 100% (D) 110% (E) 120% |
18. E
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What are Debits and Credits?
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Debits and Credits
These are the backbone of any accounting system. Understand how debits and credits work and you'll understand the whole system. Every accounting entry in the general ledger contains both a debit and a credit. Further, all debits must equal all credits. If they don't, the entry is out of balance. That's not good. Out-of-balance entries throw your balance sheet out of balance. |
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What are Debit Credits vs Account Types?
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Figure 1
Debits and Credits vs. Account Types Account Type Debit Credit Assets Increases Decreases Liabilities Decreases Increases Income Decreases Increases Expenses Increases Decreases Notice that for every increase in one account, there is an opposite (and equal) decrease in another. That's what keeps the entry in balance. Also notice that debits always go on the left and credits on the right. |
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What is a balance sheet?
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In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition".[1] Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year.
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What is Double Entry accounting?
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The double-entry bookkeeping system was codified in the 15th century and refers to a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different accounts.[1] In modern accounting this is done using debits and credits within the accounting equation: assets = liabilities + equity. The accounting equation serves as a kind of error-detection system: if at any point the sum of debits does not equal the corresponding sum of credits, an error has occurred.
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What is an income statement
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The Income Statement shows the sales (incoming revenues) and expenses over a set period of time. This statement is a good indicator of the profitability of a business during a particular period, as it shows the net result when the sales of the business are put against its expenses.
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What are assets
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Assets
Assets are anything with commercial value that your business owns. They are divided into three categories: current assets, fixed assets, and other assets. Current assets are cash, accounts receivable, inventory, and other assets that will likely be turned into cash, bartered, exchanged, or converted into an expense within a year during the normal course of business. Included in the “other current assets” category are loans to shareholders, also known as due to shareholders. |
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What are liabilities
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Liabilities
Liabilities are company debts or obligations to outside parties as a result of goods or services that were transferred to your company on a specific date that has already passed. Current liabilities are the portion of those obligations that are to be paid out during the course of the year, while long-term liabilities are the portion of your company's obligations that extend beyond that timeframe. Current liabilities include accounts payable, accumulated taxes and payroll liabilities, and the current amount owing on business loans and/or leases. Long-term liabilities, meanwhile, include the balance of your loans, leases, and other liabilities beyond the current calendar year. Return to quicklinks menu^ |
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What are intangabiles
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The Intangibles
While Intangible Assets do not appear directly on your balance sheet, they can be a significant factor when one looks to buy or sell a business or part of the business. Intangible assets include things like good will; intellectual property such as copyrights, trademarks, patents; leases; franchises; permits and so on. While you do not list these assets on your balance sheet, they are reflected in the sense that they enable you to maintain profit margins and market share, so in turn they show up on the current assets section of your balance sheet through the revenue and profits they create. |
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Equity what is it?
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Equity
Something that is often difficult for new entrepreneurs to grasp is the way equity is calculated on the balance sheet, where the total assets always equal the total liabilities plus equity. In other words, your company's equity is equal to the value of its total assets minus its total liabilities. If the business assets are greater than the liabilities, which is hopefully the case, then the equity of the business is the positive difference between the two numbers. |
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Liability Accounts
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Examples of liability accounts reported on a company's balance sheet include:
* Notes Payable * Accounts Payable * Salaries Payable * Wages Payable * Interest Payable * Other Accrued Expenses Payable * Income Taxes Payable * Customer Deposits * Warranty Liability * Lawsuits Payable * Unearned Revenues * Bonds Payable * Etc. These liability accounts will normally have credit balances. Contra liabilities are liability accounts with debit balances. (A debit balance in a liability account is contrary—or contra—to a liability account's usual credit balance.) Examples of contra liability accounts include: * Discount on Notes Payable * Discount on Bonds Payable * Etc. |
