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21 Cards in this Set
- Front
- Back
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Accounting
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Recording, classifying, summarizing, and interpreting of financial events and transaction in an organization to provide interested parties needed financial information.
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and Who makes use of a firm's accounting information?
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Outside parties - like employees, owners, creditors, unions, investors and the government.
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What are some inputs of the accounting system?
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Accounting documents, sales documents, purchasing documents, shipping documents, payroll records, bank records, travel records, entertainment records.
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What is the "processing" part of the accounting system?
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1)Entries are made into journals; recording
2) The effects of these journal entries are transferred or posted into ledgers; classifying 3) All accounts are summarized. |
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What are "Outputs" of the accounting system?
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Financial Statements, balance sheet, income statement, statement of cash flows, other reports (e.g, annual reports)
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What is the ACCOUNTING CYCLE?
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A SIX step procedure that results in the preparation and analysis of the major financial statements. (1. Analyze source documents (sales, slips, travel records, etc. 2. Record transactions in journals. 3. Transfer (post) journal entries to ledger 4. Take a trial balance 5. Prepare financial statements (which is balance sheet, income statement, and statement of cash flows) 6. Analyze financial statements.
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BWhat is Bookkeeping?
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The recording of a business transactions. Bookkeepers divide a firm's transactions into meaningful categories and post them into a record book or computer program called a journal.
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What is a Double-Entry Bookkeeping?
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Bookkeepers record all transactions in two places so they can check one list of transactions against the other for accuracy.
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What is the Financial Statement?
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A summary of all the financial transactions that have occurred over a particular period
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3 key financial statements of business are...?
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Balance sheet, income statement, statement of cash flows.
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What is the Fundamental Accounting Equation?
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The basis for the Balance Sheet. The equation must always be balanced and includes the formula: Assets = Liabilities + Owners Equity.
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What is Ratio Analysis?
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The assessment of a firm's financial condition using calculations and financial ratios developed from the firm's financial statements.
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Some key ratios include....?
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Liquidity ratios, leverage ratios, performance ratios, activity ratios.
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What do liquidity ratios measure?
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A firm's ability to turn assets into cash to pay its short-term debts.
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What are two key Liquidity ratios?
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CURRENT ratio and ACID-TEST ratio (This information is found on the firm's BALANCE SHEET)
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What do LEVERAGE ratios measure?
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the degree to which a firm relies on borrowed funds in its operations
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Some key leverage ratios?
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Debt to Owner's Equity Ratio. (This information is found on the firm's BALANCE SHEET)
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What do PROFITABILITY ratios measure?
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how effectively a firm's managers are using it various resources to achieve profits.
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Some key profitability ratios include...?
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Basic Earnings per share, return on sales, return on equity. (This information is found on the firm's BALANCE SHEET AND INCOME STATEMENT)
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What do ACTIVITY ratios measure?
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measure how effectively management is turning over inventory.
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Some key Activity ratios include....?
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inventory turnover ratio. (This information is found on the firm's balance sheet and income statement.)
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