Accounting Midterm

Question Answer
Generally refers to the process that results in the preparation and reporting of financial statements for an entity Financial Accounting
Concerned with the use of economic and financial information to plan and control many activities of the entity and to support the management decision-making process Managerial Accounting
A subset of managerial accounting that relates to the determination and accumulation of product, process, or service costs Cost Accounting
An individual earns the _______ professional designation by fulfilling certain education and experience requirements and passing a comprehensive four-part examination CPA
What does GAAP stand for? Generally Accepted Accounting Principles
Having ____________ means being honest and forthright in dealings and communications with others Integrity
An entity's financial statements are the end product of a process that starts with ____________ between the entity and other organizations and individuals. Transactions
Transactions are summarized into ____________, and are further summarized in financial statements Accounts
The __________________ is a listing of the organization's assets, liabilities, and stockholders' equity. Balance Sheet
The Balance Sheet is sometimes referred to as the ____________________ Statement of Financial Position
What is the accounting (or balance sheet) equation? Assets = Liabilities + Stockholders' equity
What are the Balance Sheet assets? Cash, accounts receivable, equipment
Represent amounts due from customers who have purchased merchandise on credit and who have agreed to pay within a specified period or when billed. Accounts Receivable
What are the Balance Sheet liabilities? Accounts Payable, Long-term debt, short-term debt, other accrued liabilities
Stockholders' equity is sometimes referred to as ______________ Net Assets
Term representing cash and other assists that are likely to be converted into cash or used to benefit the entity within one year Current Assets
Liabilities that are likely to be paid with cash within one year of the balance sheet date Current Liabilities
The income statement is sometimes referred to as the ________________ Statement of Earnings, Profit and Loss Statement, Statement of Operations
What is represented on the Income Statement? Gains, Losses, Revenue, Expenses
Selling, general, and administrative expenses Operating Expenses
Represents the total cost of merchandise removed from inventory and delivered to customers as a result of sales Cost of Goods Sold
Total Revenue (Sales) – Cost of Goods Sold = Gross Profit
Gross profit – Total Operating Expenses = Operating Income
The difference between the total amounts invested by the stockholders and the par value or stated value of the stock Additional Paid-in Capital
Distributions of earnings that have been made to the stockholders (thereby reducing retained earnings) Dividends
What are the types of activities shown on a cash flow statement? Operating, Investing, Financing
Cash received for the sale of merchandise inventory is an example of what kind of cash flow activity? Operating Activity
Cash paid for equipment is an example of what kind of cash flow activity? Investing Activity
Cash received from the sale of common stock is an example of what kind of cash flow activity? Financing Activity
What is added back to net income because it did not require the use of cash? Depreciation Expense
Refers to the presumption that the entity will continue to operate in the future (that it is not being liquidated). Going Concern Concept
Results in recognizing revenue at the point of sale and recognizing expenses as they are incurred, even though the cash receipt or payment occurs at another time or in another accounting period Accrual Accounting
In accounting, relates to making judgments and estimates that result in lower profits and asset valuation estimates rather than higher profits and asset valuation estimates. Conservatism
Analysis that results in a much more meaningful comparison because even though the data used in the ratio may have been developed under different financial accounting alternatives, internal consistency allows for better review Trend
What is the Return on Assets ratio? Net Income / Average Total Assets
What is the Return on Investment Ratio? Operating Income / Average Operating Assets
What is the Net Income Margin? Net Income / Sales
What is the Return on Equity formula? Net Income / Average Stockholders' Equity
Refers to a firm's ability to meet its current obligations, measured by relating its current assets and liabilities as reported on the balance sheet Liquidity
Working Capital Formula Current Assets – Current Liabilities
What is the Current Ratio? Current Assets / Current Liabilities
Where transactions are originally recorded Journal
After transactions are initially recorded, they are posted to a ______________ Ledger
Serves as an index to the ledger, and each account is number to facilitate the frequent written references that are made to it Chart of Accounts
Left side of the T-Account Debit side
Right side of the T-Account Credit Side
Increases the normal balance of an asset account Debit
Increases the normal balance of a liability account Credit
Decreases the normal balance of a stockholders' equity account Debit
Increases the normal balance of a revenue (sales) account Credit
Increase the normal balance of an expense account Debit
Completed at the end of the accounting period to reflect accrual accounting in the financial statements Adjustment
Increases the normal balance of the accounts payable account Credit
Increases the normal balance of the equipment account Debit
Decreases the normal balance of the depreciation expense account Credit
Increases the normal balance of the revenue (sales) account Credit

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