Study Guide: Terms and Definitions
85 Cards in this Set
| Front | Back |
|---|---|
|
Sole Proprietorship
|
One owner
|
|
Partnership
|
two or more owners
|
|
Corporation
|
Many owners
|
|
What are the three basic forms of business organization structures?
|
Sole proprietorship Corporation Partnership
|
|
What are the three types of businesses?
|
Merchandising Service Manufacturing
|
|
Merchandising
|
Buying and selling of products
|
|
Service
|
Provide service
|
|
Manufacturing
|
Make and sell products
|
|
Assets
|
Right to use resources with future benefit
|
|
Liability
|
obligation to transfer resources in the future to suppliers of goods and services
|
|
Owner's Equity
|
Net assets that belong to owners
|
|
Revenue
|
amounts earned from providing goods and services
|
|
What can also be classified revenue?
|
interested earned
|
|
What is not considered revenue?
|
Loans
|
|
Expenses
|
amount incurred in effort to generate revenue
|
|
Is accounting cash or accrual basis? what are the key terms for this basis?
|
accrual-revenues and expenses are recognized in the period in which they arise, regardless of when the cash for the revenue or the expenditure actually occurs. "sales" and "expenses" are the key
|
|
What are the key terms for cash basis?
|
received or "paid"
|
|
What is the accounting equation?
|
Assets= Liabilities + Owner's Equity
|
|
What are some ways to calculate net income?
|
revenue- expenses= net income or 1. Sales- COGS=Gross Profit 2. Operating Expenses-Tax= Net Loss 3. Gross Profit- Net Loss= Net Income or Loss or Sales- COGS-Operating-Expense-Tax= Net Income or Loss
|
|
What are the 4 Concepts of Accounting?
|
Business Entity Monetary Entity Going Concern Periodicity
|
|
What is Business Entity?
|
Keep business records and personal records separate
|
|
What is Monetary Entity?
|
Maintain businesses records in currency
|
|
What is going concern?
|
Business will continue past the current period
|
|
What is Periodicity?
|
Profits/Losses must be determined periodically
|
|
What are some internal stakeholders?
|
owners, managers, employees, etc
|
|
What are external stakeholder?
|
customers, suppliers, etc
|
|
What are the 4 basic financial Statements?
|
income statement statement of cash-flows statement of owner's equity balance sheet
|
|
What is found on the income statement?
|
revenues-expenses for a period of time
|
|
What is found of the statement of cash-flows?
|
indicates cash inflows and outflows from operating, investing, and financing activities for a period of time
|
|
What is found on the statement of owner's equity?
|
indicates changes in the owner's equity for a period of time
|
|
What is found on the balance sheet?
|
indicates the ending balances of assets, liabilities and owner's equity at a point in time
|
|
What is the relationship between the 4 financial statements?
|
Each statement depends on the other to get certain numbers to preparer the next and they help create the balance sheet
|
|
What is the objective of financial statements?
|
provide useful information about financial position, performance and changes in financial position of an enterprise
|
|
Current Ratio
|
current assets/current liabilities
|
|
What two items are not current?
|
buildings and equipment
|
|
Debt to Equity
|
liabilities/owner's equity
|
|
Return on Sales
|
net income/sales
|
|
What are the characteristics that accounting information should have?
|
Relativity Reliability Benefits> Costs Materiality
|
|
What is Concept 1 of the accounting concepts?
|
Useful information for decision making
|
|
What is Concept 2 of the accounting concepts?
|
Characteristics of accounting information
|
|
What are the 3 phases of the management cycle?
|
planning performing evaluating
|
|
What is Financing
|
Raising capital to support operating expenses
|
|
What is investing?
|
Creating the infrastructure to support operating activities
|
|
What is operating?
|
Profit-making activities of the company
|
|
What is the Balance Scorecard?
|
a holistic approach to planning and performance measurement
|
|
What are the 4 balanced scorecard perspectives?
|
Financial Internal Customer Learning and Growth
|
|
What is the internal control system??
|
process affected by an organization's structure, work and authority flows, people, and management information systems
|
|
What are the 5 internal control procedures?
|
Proper Authorization Separating incompatible duties Maintaing adequate documentation Physically controlling assets and documents Providing independent checks on performances
|
|
What are the internal controls of cash?
|
cash receipts cash disbursements bank reconciliation
|
|
What is the bank adjustments to reconciliation's?
|
- outstanding checks (written by the company) + Deposits in transit errors made by the bank
|
|
What is the book adjustments of reconciliation's?
|
+ interest earned - service charges - NSF checks errors made by company
|
|
What is return on owners equity ratio?
|
Net income/owner's equity= return on owners equity ratio
|
|
What is considered a good return on owners equity?
|
5%-10% +
|
|
What are the 5 activities of the revenue process?
|
determine the marketing and distribution channels receive and accept orders deliver goods/services receive payment from customers Provide customer service
|
|
What is FOB destination?
|
The transfer of owner ship occurs when products arrive to the buyer
|
|
What is FOB shipping?
|
the transfer of ownership occurs when the products leave the shipping dock of the suppliers
|
|
What are the decisions of the Revenue Process?
|
provide customers with products/services receive payment from customers provide customer support
|
|
What are the decisions of the Expenditure Process?
|
receive high quality goods/services at a low cost pay for goods/services in a timely manner develop good relationships with the suppliers
|
|
What are the 4 activities of the expenditure process?
|
determine the needs for goods/services select suppliers and order receive goods pay for goods/services
|
|
What are the decisions of the Conversion Process?
|
Manufacture high quality products utilize labor and resources efficiently
|
|
What are the 4 activities of the Conversion Process?
|
schedule process obtain raw material use of labor and other manufacturing resources store finished goods until sold
|
|
What is the behavior pattern between cost and revenue?
|
the relationship between activity and revenue/cost
|
|
What is the relevant range?
|
the normal range of activity
|
|
What is an activity driver?
|
activity that causes the change in revenue/cost
|
|
What is a fixed cost/revenue?
|
the variable that is constant in total over a relevant range and changes per unit of activity over relevant range
|
|
What is a variable cost/revenue?
|
the variable that changes in total over a relevant range and is constant per unit of activity over a relevant range
|
|
What is a mixed cost/revenue?
|
changes in total but not proportionally over a relevant range changes per unit over the relevant range a fixed and variable cost
|
|
What is the high/low method?
|
high$-Low$/high activity- low activity Total Expenses-(Variable rate x low hours)= Fixed Expenses
|
|
What is the advantage of the linear regression line?
|
accurate
|
|
How do u calculate Total Cost?
|
VC x Q+FC
|
|
How do you calculate total revenue?
|
SP x Q
|
|
How do you calculate Break-even in $?
|
(SP x Q - VC x Q)- FC CM x Q- FC
|
|
How do you calculate the Contribution Margin?
|
SP-VC
|
|
How do you calculate target profit before taxes?
|
CM x Q -FC
|
|
How do you calculate target profit after taxes?
|
(CM x Q - FC)/ (1-tax rate)
|
|
An increase in selling price will ____ break-even
|
decrease
|
|
A decrease in selling price will ____ break-even
|
increase
|
|
An increase in variable cost will ______ break-even
|
increase
|
|
An decrease in variable cost will _____ break-even
|
decrease
|
|
An increase in fixed cost will ____ break-even
|
increase
|
|
An decrease in fixed cost will ____ break-even
|
decrease
|
|
What does the change in tax rate do to the break-even?
|
has no impact
|
|
What are sunk costs?
|
past and irrelevant for decision making
|
|
What are opportunity costs?
|
benefits forgone
|
|
What is the equation for accept/reject and buy/make?
|
dm+dl+unit-related+batch-related= cost per unit cost per unit- selling price= the profit or loss per unit
|
ACCT 2101: Chapter 5