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Unformatted text preview: EXAM 2 STUDY GUIDE chapters 14, 15, 16 and appendix C, and American Dream Chapter 14: Accounting the recording, measurement, and interpretation of financial information Accounting cycle the four-step procedure of an accounting system: examining source documents, recording transactions in an accounting journal, posting recorded transactions, and preparing financial statements Accounting equation assets = liabilities + owners equity Accounts receivable money owed a company by its clients or customers who have promised to pay for the products at a later date Annual report summary of a firms financial information, products, and growth plans for owners and potential investors Assets a firms economic resources, or items of value that it owns, such as cash, inventory, land, equipment, buildings, and other tangible and intangible things Balance sheet a snapshot of an organizations financial position at a given moment Ratios (debt, liquidity, profitability, etc.) Double-entry bookkeeping a system of recording and classifying business transactions that maintains the balance of the accounting equation Gross income revenues - the cost of goods sold required to generate the revenues Income statement a financial report that shows an organizations profitability over a period of time month, quarter, or year Liabilities debts that a firm owes to others Owners equity = assets - liabilities and reflects historical values Return on equity = net income / owners equity also called return on investment (ROI) Revenue the total amount of money received from the sale of goods or services, as well as from related...
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- Spring '07