Accounting Exam Flashcards

Terms Definitions
Stockholders
Investors
FMV
fair market value
Check
Cash at the bank
+ operating
Amortization of intangible assets
ad expense
expense, income statement, debit
receipt
a business form giving written acknowledgement for cash received
Classification categories
Current assets, long-term investments, plant assets, intangible assets, current liabilities, long-term liabilities, and equity
Merchandise
Goods that a merchandising business purchases to sell
Bonds payable
long-term liabilities that represent money lent to the fim that must be paid back
Public Accounting
Accountant employed individually or within a public accounting firm in tax or audit services
liabilities
Moneys owed; debts or pecuniary obligations
taxation
tax specialist offer advice on tax planning prepare tax returns
Creditors
The entities a company owes money too
Understandability
Reports should be presented in a manner that makes it easy for the user to comprehend their meaning
revenue
amounts earned by delivering goods or services, increase retained earnings
product- overhead
period of product cost? cleaning crew?
Accounts Receivable Ledger
Subsidiary ledger containing only accounts for charge customers.
capital
the account used to summarize the owner's equity in a business. the capital account is an owner's equity account.
Investments in Business Combinations
Influence- controlling
% interest- >50%
Accounting treatment- consolidation
General ledger
A collection of accounts in which double entry accounting is used to record details of financial events.
Junk bonds
High-risk bonds issued by a company with a lot of outstanding debt or in a weak financial position.
temporary accounts are closed at the end of....
fiscal period
Balance sheet
The accounts payable account would be shown on the
double-entry accounting
The recording of debit and credit parts of a transaction
sale on account
sale where cash is recieved later
Chief Operation Officer
leads the company incident response process when a security breach happens
Accrual basis accounting—
uses the adjusting process to recognize revenue when earned and to match expenses with revenues. This means the economic effects of revenues and expenses are recorded when earned or incurred, not when cash is received or paid. Accrual basis is consistent with GAAP.
Business
An economic unit that aims to sell goods and services to customers at prices that will provide an adequate return to its owners.
28. The account to which revenue and expenses are closed is called
a. Cash
b. Withdrawals
c. Income Summary
d. Net Income
e. none of the above
c
cash basis accounting
reporting of revenues and expenses at the time they are collected or paid
Free enterprise system
Capitalism is an economic and social system in which capital and land, the non-labor factors of production (also known as the means of production), are privately owned; labor, goods and resources are traded in markets; and profit, after taxes, is distributed to the owners or invested in
Promissory note
A written promise to pay a specified amount off moeny, usually with interest, either on demand or at a definite future date.
certifies public accountants
who serve the general public rather than one particular company
Transposition errors
company issued a check for $27, but posted it for $72; $45 error usually divisible by 9
Noncumulative Preferred Stock
Preferred stock that does not oblige the issuer to make up a missed dividend in a subsequent year
Unadjusted Trial Balance
List of accounts and their balances after recording adjusting entries.
Accrual basis accounting.
It ensures that a company records events that change its financial statements in the periods in which the events occur, rather than only in the periods in which it receives or pays cash. Information based on accrual accounting generally better indicates a company's present and continuing ability to generate favorable cash flows than does information limited to the financial effects of cash receipts and payments.3
common internal controls over cash
segregation of duties; prepare bank reconciliations
Job order costing
Costs are accumulated by jobs, used in specific products, or when there are batches of products
Retained earnings represents
net income that has been reinvested in the company
The Income Statement
This reports the success or failure of the company's operations for a period of time.
What is a simple entry?
transaction that affects only two accounts
Statement of cash flows
A financial statement that shows how a company's operating, investing, and financing activities have affected cash during an accounting period.
Cash, Bank credit card
Fund from these sales are available to the merchandiser immediately.
Credit Card Sale
A sale in which a credit card is used for the total amount of the sale at the time of the transaction.
Which of the following are policies and procedures of good internal control of cash?
 
approval of all disbursements by check
The income statement may be prepared from the information found in the work sheets Income Statement columns.
Calculation of the change in owners Capital for the period are showm in the statement of Owners Equity. Information for this calculation may be found in the Balance Sheet columns of the work sheet (begining capital, net income, and withdrawels). The balance sheet may be prepared from information found in the work sheets Balance Sheet columns and the statement of owners equity.
a gain is recognized on the disposal of plant assets when
the sales price is greater than the book value and greater than the residual value
bookkeeping
Buchhaltung
common current liabilities
salaries,
statement of stockholders' equity
divides
Accounting
Planning, recording, analyzing, and interpreting financial information
Partner
Each member of a partnership.
restrictive endorsement
an endorsement restricting further transfer of a check's ownership
Permanent Accounts
Stock elements. Assets, liabilities, equity
Audit
analysis and report of an organization's accounting system, its records, and its reports using various tests.
activity ratio
financial ratio for evaluating management's efficiency in using a firm's assets
liability
moneys owed; debts or pecuniary obligations (
Accounting Records
Organized summaries of a business's financial activities.
Double entry
Basic accounting theory is based on
the general purpose financial statements prepared annually by a corporation would not include the:
Income tax return.
Land does not depreciate
land's usefulness never decreases
Know and understand the accounting for a basket purchase allocation
...
Managerial Accounting
Uses both financial accounting and estimated data to aid management in running day to day operations and in planning future operations
Essential Characteristics of Accounting
1-identification, measurement, and communication of financial information about 2-economic entities to 3-interested parties.
purchases allowance
credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer's accounts payable
W-2 form
wage and tax statement; a report furnished by the employer for each employee indicating gross earnings and deductions for income and FICA taxes
retailer
A business that sales to the final user the consumer.
information and communication
ensuring that important information is communicated both up and down the organization
withdrawals
what an owner takes out for personal use
for-profit business
operate to earn money for their owners.
Liquidity ratios
measure the short-term ability of the company to pay its maturing obligations and meet unexpected needs for cash.
Participating preferred stock
Preferred stock that allows preferred s hareholders the right to receive an amount in excess of the stated dividend rate or amount.
The steps involved in handling all of the transactions and events completed during an accounting period, beginning with placing data in a book of original entry and ending with a post-closing trial balance, are referred to collectively as the
a. input
b
d
Closing Entries
The transferal of the balances of the temporary accounts to the capital account
Weighted Average
provides a Cost of Goods Sold amount that falls between FIFO and LIFO.
payroll taxes
taxes based on the payroll of a business
accelerated depreciation method
records more depreciation in the early years of an assets life and less depreciation in the later years
Expense
an outflow of assets for the sales of goods and services
Record Date
The date on which ownership of stock, and thus the right to receive a dividend, is determined
Bowen et al
Three mile island. does the market value exposure to political costs.
Gross Margin Ratio
Net Sales - COGS ÷ Net Sales
certified public accountant (CPA)
an accountant who has passed certain examinations and met all other statutory and licensing requirements of a United States state to be certified by that state
the just-in-time concept of inventory management is best illustrated by
homebuilder have supplies delivered the night before
Cash Activities OUTFLOWS
Cash paid for: Purchase of goods for resale and services (electricity, etc.) Salaries and wages Income taxes Interest on liabilities
Financing Period
The amount of time from the purchase of inventory until it is sold and payment is collected, less the amount of time creditors give the company to pay for the inventory
What is a corporation?
business created under state law in the US;
gross profit rate is equal to
gross profit divided by net sales
Realization of Revenue
Revenue is recorded at the time goods or services are sold.
Profit and Loss Statement
The amount of income from the sale of funeral services would be shown on which formal financial statement?
date of declaration (cash dividend)
the date directors vote to declare and pay a dividend; liability goes up and equity goes down
How many securities does a detachable warrant have?
It has two securities1. a debt security2. and a warrant to purchase stock
show up in owners equity because they are part of retained earnings division
expenses and revenues show up where on the balance sheet
accrued expenses
liability


DM Price Variable = 


AAASp
Notes Receivable
Asset, Balance Sheet, Debit
Income
increases in the owner's equity resulting from business operations is known as
financial accounting
provides informaiton for external users
generates general purpose financialstatements
reports on financial events in the past
must conform to standars whichare externally imposed- GAAP
emphasises objective data- using actual figures
General Journal
Chronologically lists transaction and other events, expressed in terms of debits and credits to the accounts
Temporary Accounts
Accounts used to accumulate information until it is transformed to the owner's capital account.
Interim Periods
Monthly and quarterly time periods.
sole proprietorship - disadvantages
proprietor personally liable, financing may be difficult, transfer of ownership may be difficult
Business Entity
exists independently of its owner's personal holdings
return on assets
=net income/average total income. percent is how much growth on assets there was from the company's investments. more important than asset turnover.
Conceptual Framework
deals with theoretical and conceptual issues and provides and underlying structure for current and future accounting and reporting standards
contra account
account linked with another account, it has an opposite normal balance and it is reported as a subtraction from the other accounts balance
Profit
The excess of revenue over expenses for a period
Financial Statements
Financial reports that summarize the financial condition and operations of a business.
Computer
An electronic tool for the rapid collection, organization, and communication of large amounts of information.
Cost Principle
Accounting Information is based on actual cost, not perceived value. Makes accounting reliable.
Variable Costing
- separates variable costs and fixed costs
- does not allocate fixed overhead cost
- contribution margin
- used for internal decisions
- fixed overhead as a period cost
Marginal Cost
Extra cost to produce one additional unit
Analyzing Transactions
"give and receive" The dollar amount for assets must always equal the total of liabilities plus stockholder's equity.
work sheet
a columnar accounting form used to summarize the general ledger information needed to prepare financial statements
Accounting Standards
A set of regulations that outline acceptable accounting practices and procedures.
Equity Ratio
Total Equity / Total Assets --- %
Withholding Allowance
Deduction from total earnings for each person legally supported by a tax payer, including the employee.
If common stock is classified as securities available for sale, cash dividends are classified by the investor as:
dividend income
EBIT Profit Margin (Definition)
measures earnings before interest expense and income taxes, relative to Sales

*** If there is non-operating income, the value has the same meaning as Operating Profit Margin ***
Indirect Costs
Untraceable; cannot be identified to a particular operating department of division
accounts receivable turnover
measures the number of times on average the company collects its accounts receivable
subsidiary ledger
is a list of individual accounts with a common characteristic. It contains detailed information on specific accounts in the general ledger.
variable cost
a cost that is proportional to the volume of activity
code of conduct
A statement that guides the ethical behavior of a companyand its employees.
Accounts Payable
Money owed to vendors for services or products purchased by the company on account
Business entity assumption—
a business is accounted for separately and distinctly from its owner(s). A business entity can take one of three legal forms:
Examples of Accrued expenses
accrued interest on notes receivable, accrued at end of period, accrued utility expenses and taxes
sales commission
should be based on the product with the highest cont margin not the highest price
schedule of accounts payable
a listing of vendor accounts, account balances, and total amount due all vendors
declaring a dividend
action by a board of directors to distribute corporate earnings to stockholders
role of corrective controls
invest in new methods for responding to information security incidents so as to decrease the value of C by 30 minutes; to react to incidents and to take corrective actions on a timely basis
 
Point of Sale systems, features that assist accountants and managers: 
 
1.Touch screen menus.
2.Bar code scanning.
3.Real-time access to inventory and price data.
4.Credit card authorizations during the sale.
5.Real-time update of cash, sales, and inventory records.
6.Immediate summaries and analyses.
7.Integration with the company’s general ledger system.
Business Transaction
Any events that causes a change in the assets, liabilities or owners equity of a business
target pricing (target full cost)
revenue at market price - desired profit
owner's claims on the economic resources owned by the firm (capital)
stockholder's equity, also known as net assets
What is the return on sales ratio?
net income / sales

managers follow this closely from month to month
What is a credit (cr.)?
denotes an entry on the right side of any account
When a bond trades at a price above the face value...
it is said to be selling at a premium
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Term:
Definition:
Definition:

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