Accounting Midterm 2 Study Guide

Front 1

Effect of payroll deductions on the financial statements.

Back 1

The amounts withheld represents liabilities for the company. It reduces the companies assets.Liabilities are increased and owner's equity is decreased

Front 2

Reporting expenditure process events-
Expenses Incurred

Back 2

Income Statement

Front 3

Reporting expenditure process events-Cash paid for operating activities

Back 3

statement of cash flows

Front 4

Reporting expenditure process events-assets and liabilities resulting from operating activities

Back 4

balance sheet

Front 5

Estimating cash paid for inventory

Back 5

beginning balance
+ net purchase on account
= inventory available for sale or use
-cost of goods sold
=ending inventory

Front 6

pricing strategies

Back 6

1. customers (customer perspective)
2. competitors (learning and growth perspective)
3. legal and social issues (learning and growth perspective)
4. cost (internal perspective)

Front 7

markup

Back 7

an additional amount to the cost of their products and services.

Front 8

selling margin

Back 8

selling price-cost

Front 9

Cost-based pricing policy

Back 9

Selling price=cost+(cost*markup percentage)

Front 10

selling margin percentage

Back 10

selling margin/ selling price

Front 11

price fixing

Back 11

group of companies agree to limit supply and charge identical prices for their goods and services.

Front 12

price gouging

Back 12

price of setting an excessively high price with the intent of reaping short term excessive profits

Front 13

penetration pricing

Back 13

setting an initial selling price low in an attempt to gain market share

Front 14

predatory pricing

Back 14

practice of selling products below cost in an attempt to drive out the competition, control the market, and then raise the price

Front 15

dumping

Back 15

company sells it's product below cost in foreign countires

Front 16

Skimming pricing

Back 16

setting an initial selling price high in an attempt to make early profits

Front 17

life-cycle pricing

Back 17

a pricing strategy based on the estimated total cost of product over it's life

Front 18

target pricing

Back 18

a pricing strategy where the company first estimates the selling price and then subtracts the required markup to determine target cost

Front 19

Reasons to maintain inventory

Back 19

1. to meet customer demand
2. to smooth production scheduling
3. to take advantage of quantity discounts
4. to hedge against price increases

Front 20

Reasons not to maintain inventory

Back 20

1. cost
2. Hides problems

Front 21

ordering costs

Back 21

costs incurred to place one additional order for inventory; costs that vary with the number of orders placed and received

Front 22

carrying costs

Back 22

costs that vary with the number of units carried in inventory

Front 23

reorder point

Back 23

inventory level that when reached indicates the need to place an order for additional inventory

Front 24

EOQ Economic order quantity

Back 24

minimizes short-term ordering and carrying costs
1. there is no seasonal fluctuation throughout the year
2. lead time is constant throughout the year, regardless of supplier
3. The entire order is received at the same time
4. No quantity discounts are available
5. Inventory size is not limited; orders of any size are possible
6. Batch-related, product sustaining, and facility-sustainng storage costs are irrelevant
;is a short term model

Front 25

daily demand

Back 25

annual demand/#of business days

Front 26

reorder point formula

Back 26

daily demand * lead time +safety stock=reorder point

Front 27

lead time

Back 27

number of days elapsing from the time the order is placed to when it's received

Front 28

Just-in-time -Jit model

Back 28

long-run model based on the principle that inventory should arrive just as needed for production in the quantities needed

the sales estimate must be accurate so the production can be completed when customers demand the product

must be completed with zero defects

strong relationship with suppliers

good relationship with employers

Front 29

eorder point when company maintains safety stock

Back 29

(daily demand*lead time)+safety stock

Front 30

jit model

Back 30

eliminates distruptions in production
reduces or eliminates nonvalue-added activities
minimizing inventory

Front 31

bonus rate

Back 31

percentage the bonus will pay

Front 32

bonus base

Back 32

form of income the bonus rate is applied to

Front 33

bonus based on income bef income taxes

Back 33

bonus=(income bef bonus-bonus) * bonus rate

Front 34

bonus based on net income

Back 34

bonus=(income bef bonus and income taxes-bonus-income taxes)*bonus rate

income taxes=(income bef bonus and income taxes-bonus)*tax rate

Front 35

piece-rate pay

Back 35

employee receives compensation based on the number of items completed.

Front 36

commission pay

Back 36

percentage of revenue generated

Front 37

hourly pay

Back 37

paid a certain number per hour

Front 38

salary pay

Back 38

compensation based on a fixed amount per period

Front 39

gross pay

Back 39

full amount employee earns

Front 40

net pay

Back 40

total earned after withholdings

Front 41

budgetary slack

Back 41

difference b/t what a person with input into the budgeting process chooses as an estimate of revenues or expenses and what is actually a realistic estimate; deliberately induced bias

Front 42

mandated budgeting

Back 42

op-down budgeting, the budget is prepared by upper management based on predetermined standards

Front 43

participatory budgeting

Back 43

bottom-up budgeting, the budget is coordinated by upper management based on input from lower level employees

Front 44

incremental budgeting

Back 44

strategy whereby the company uses the prior periods budget as a starting point in preparing the periods budget

Front 45

zero-based budgeting

Back 45

company begins each budget period with a zero budget, requires consideration of every activity undertaken by the department or segment

Front 46

master budget

Back 46

compilation of all the budgets and shedules prepared planning for the revenue, conversion and expenditure process

Front 47

Revenue process planning

Back 47

1. sales budget
2.cash reciepts shedule
3. accounts recievale shedule
4. marketing and distribution budget

Front 48

Conversion process planning

Back 48

1. production budget

Front 49

Expenditure process planning

Back 49

1. direct materials purchase budget
2. direct labor and overhead budget
3. administrative budget
4.cash disbursement schedule
5.accounts payable schedule

Front 50

planning budget schedules

Back 50

1. sales budget
2. cash receipts schedule
3. accounts receivable schedule
4. marketing and distribution budget

Front 51

Budgeted financial Statements

Back 51

1. Finished Goods schedule
2. cost of goods sold shedule
3.income statement
4.statement of cash flows
5. balance sheet

Front 52

sales budget

Back 52

shows the expected sales for the period in both physical quantity and financial dollar amounts for a particular product line, geographic area, or sales manager

Front 53

cash receipts schedule

Back 53

shows anticipated cash collections from customers for the period

Front 54

accounts recievalbe shedule

Back 54

indicates the changes expected in the balance of accounts receivable during the budget period

Front 55

Calculating ending balance of accounts receivable

Back 55

+Credit sales during the month
=total amount due from customers
-cash reciepts from credit customers during the month
-cash sale discounts taken by customers during the month
=ending balance of accounts receivable

Front 56

production budget

Back 56

uses information from the sales budget plus the company's desired ending inventory level to determine the quantity of finished goods to produce each period

Front 57

direct materials purchases budget

Back 57

reflects the expected cost of direct material purchases during the period

Front 58

cash disbursement shedule

Back 58

expected cash outflows during the period

Front 59

Estimated balance in accounts payable is determined by.........

Back 59

beginning balance of accounts payable
+purchase on account during the month
=total amount owed to suppliers
-cash paid to suppliers on account during the month
-cash purchase discounts for the month
=ending balance of accounts payable

Front 60

accounts payable schedule

Back 60

indicates the expected changes in the balance of accounts pauable during the period

Front 61

owners equity increase, owners equity decrease

Back 61

common stock is issued in exchange for perfected stock

Front 62

Trial balance

Back 62

a listing of all the general ledger account balances to ensure that debits equal credits

Front 63

general ledger

Back 63

collection of specific asset, liability, and owner's equity from the chart of accounts

Front 64

adjusting entry

Back 64

internal entry, required to adjust the accounts for internal events prior to preparing financial statements

account balance has been sated properly and expense has been recognized

Front 65

revenue accrual

Back 65

recorder when revenues are earned in one accounting period and payment is recieved in later periods


increase assets, increase revenue(inc owner's equity)

Front 66

revenue defferal

Back 66

company has been paid in advance by a client for services to be performed in the future, revenue recognition has been deffered

decrease liabilities, increase revenue
inc owners equity

Front 67

expense accrual

Back 67

expenses are incurred in one acocunting period and payment is made in later periods

increase liabilites, increase expense,
decrease owners equity

Front 68

expense defferal

Back 68

company uses previously purchased assets in an attempt to generate revenue in future periods

Front 69

closing entry

Back 69

prepared to close income statement accounts

Front 70

permanent account

Back 70

asset, liability, owners equity whose balance is carried over from year to year

Front 71

Income statement to statement of retained earnings

Back 71

net income transfers from income statement to statement of retained earnings

Front 72

Statement of Retained earnings to balance sheet

Back 72

The ending balance of statement of retained earnings transfers as retained earnings to balance sheet