question

accounting

answer

the process of recording, summarizing, and analyzing financial transactions

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financial accounting

answer

designed primarily for decision makers outside of the the company

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managerial accounting

answer

designed primarily for decision makers within the company

question

creditors

answer

banks or other lenders that companies borrow money from

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disclosure

answer

the act of providing financial information to external users

question

planning activities

answer

a company's goals and the strategies adopted to reach those goals are a product of this

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investing activities

answer

consist of acquiring and disposing of the resources needed to produce and sell a company's products and services

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assets

answer

a company's resources that provide future benefit

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financing activities

answer

refers to methods companies use to fund investments

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liabilities

answer

obligations the company must repay in the future

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accounting equation

answer

assets=liabilities+equity

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operating activities

answer

the production, promotion, and selling of a company's products and services

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revenue

answer

increase in the equity resulting from the sale of goods and services to customers

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expense

answer

cost incurred to generate revenue, including the cost of the goods and services sold to customers as well as the cost of carrying out other business activities

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income

answer

net increase in equity from the company's operating activities (revenues-expenses)

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balance sheet

answer

reports a company's financial position at a point in time; lists the company's investments and sources of financing using the accounting equation

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income statement

answer

details amounts for revenues and expenses, and the difference between these two amounts is net income

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statement of stockholders' equity

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details changes in owner financing

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statement of cash flows

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details the sources and uses of cash

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cost of goods sold

answer

important expense that is typically disclosed separately in the income statement immediately following revenues

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retained earnings

answer

represents the income the company has earned since its inception, minus the dividends it has paid out to shareholders (earned capital)

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generally accepted accounting principles (GAAP)

answer

a set of standards and accepted practices, based on underlying principles, that are designed to guide the preparation of the financial statements

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American Institute of Certified Public Accountants (AICPA)

answer

sets accounting standards

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Financial Accounting Standards Board (FASB)

answer

seven member board that has primary responsibility for setting financial accounting standards; developed framework to form the basis for future discussion of proposed standards and serve as a guide to accountants

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Public Company Accounting Oversight Board (PCAOB)

answer

approve auditing standards and monitor quality of financial statements and audits

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profitability

answer

reveals whether or not a company is able to bring its product or service to the market in an efficient manner, and whether the market values that product or service

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solvency

answer

refers to ability of a company to remain in the business and avoid bankruptcy or financial distress

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liquidity

answer

the ease of converting non cash assets into cash

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current assets

answer

the most liquid assets; assets that are expected to be converted into cash or used in operations within the next year

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cash

answer

currency, bank deposits, certificates of deposit, and other equivalents

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accounts receivable

answer

amounts due to the company from customers arising from the sale of products or services on credit

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inventory

answer

goods purchased or produced for sale to customers

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prepaid expenses

answer

costs paid in advance for rent, insurance, or other services

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property, plant, and equipment (PP&E)

answer

includes land, factory buildings, warehouses, office buildings, machinery, office equipment, and other items used in the operations of the company

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intangible assets

answer

includes patents, trademarks, franchise rights, goodwill, and other items that provide future benefits, but do not possess physical substance

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historical cost

answer

original acquisition cost

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equity

answer

represents capital that has been invested by the shareholders, either directly via the purchase of stock, or indirectly

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fair value

answer

current market value

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accounts payable

answer

amounts owed to suppliers for goods and services purchased on credit

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accrued liabilities

answer

obligations for expenses that have been recorded but not yet paid

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current maturities of long-term debt

answer

the current portion of long-term debt that is due to be paid within one year

question

current liabilities

answer

obligations that are due within one year or within one operating cycle

question

long-term debt

answer

amounts borrowed from creditors that are scheduled to be repaid more than one year in the future

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common stock

answer

the capital received from the primary owners of the company; it is divided into shares

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contributed capital

answer

net funding that a company has received from issuing and reacquiring its equity shares

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earned capital

answer

cumulative net income retained by the company

question

account

answer

mechanism for accumulating the effects of an organization's transactions and events

question

charts of accounts

answer

listing of the titles and identification codes of all accounts for a company

question

double-entry accounting system

answer

to maintain the equality if the accounting equation, each transaction must affect at least two accounts

question

net income

answer

the difference between revenues and expenses

question

operating expenses

answer

usual and customary costs that a company incurs to support its main business activities

question

revenue recognition

answer

revenue should be recorded when it is earned, even if not yet received in cash

question

ADECLRR

answer

All Dogs Eat Cute Little Red Rabbits

question

credit

answer

make common stock, liabilities, revenue, and retained earnings go up / right side

question

debit

answer

make assets, dividends, and expenses go up / left side

question

journal entry

answer

an accounting entry in the financial records of a company

question

T account

answer

one side is used to record increases to the account and the other decreases / debit on left / credit on right

question

gross profit (margin)

answer

difference between revenues at selling prices and cost of goods sold at purchase price or manufacturing cost

question

accounts payable

answer

amounts owed to suppliers for goods and services purchased on credit

question

accrual accounting

answer

the recognition of revenue when earned and the matching of expenses when earned

question

auditor

answer

provide an opinion as to whether the statements present fairly and in all material a company's financial condition and the results of its operations

question

matching

answer

recognizing expenses in the same period that the associated revenue is recognized

question

notes payable

answer

account assigned to a company's financial borrowings

question

return on equity

answer

(net income / average stockholders' equity); over 10%+ suggests reasonable returns

question

debt to equity ratio

answer

(total liabilities / total stockholders' equity)

ACTG 210 Midterm 1 – Flashcards

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