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D1 96 - Principles of Financial and Managerial
Accounting |Questions with 100% Correct
Answers | Updated & Verified | 2024
bookkeeping - ✔✔day to day keeping of transcations steps of decision making - ✔✔identify issue gather information identify alternatives select option that most likely results in desired objective accounting - ✔✔analysis of events record and report financial effects of business activities where does capital come from (3) - ✔✔investors creditors(lenders) business itself (from earnings retained) 2 main types of accounting - ✔✔financial and managerial managerial accounting - ✔✔gather and analysis of information for internal use and decision making.
financial accounting - ✔✔gather, report, analysis of information for external users- investors and creditors. summary of a business what does managerial accounting review - ✔✔product cost, breakeven analysis, budgeting, performance analysis, outsource production what does financial accounting review - ✔✔credit analysis, financial health, estimate value of the company examples of external financial reports for financial accounting - ✔✔annual report, financial statement, balance sheet, income statement, statement of cash flow balance sheet - ✔✔reports assets and liabilities. basic. list as of a point in time. as of today, as of yesterday income statement - ✔✔how much did you ,ake period of time - from nov to jan statement of cash flow - ✔✔where did the cash come from and where did the cash go period of time - from nov to jan lender - ✔✔lends money with intend to get it back plus interest. need current income, existing obligations, existing assets, payroll stub, tax return, monthly payments, bank stmts
iasb - ✔✔International Accounting Standards Board develop international accounting standards. made up of members from many countries aicpa - ✔✔american institute of certified public accountants administers the cpa exam. enforces professional sanction by taking away cpa license when acted unethically. role and purpose of accounting - ✔✔accumulate and report on financial information about performance, financial position, cash flow of a business. used to reach decisions about how to manage the business, invest in it, or lend money to it what is a balance sheet - ✔✔statement of what they have and how they financed it at a specific point in time. balance sheet equation - ✔✔assets = liabilities + owners equity what are assets and examples - ✔✔what they own or control that will provide probable future benefits cash, accts receivable, inventory, buildings, land. what are liabilities and examples - ✔✔what we owe. obligations that require future sacrifice. phone bill, car loan, accts payable, fed and state govt tax, mortgage, unearned revenue
what is owners equity and examples - ✔✔owners share, stockholders equity, how much owner originally invested in business + how much profit they have left capital stock- amt given by shareholders to obtain shares of stock(capital=$ so money from stocks) retained earnings- earnings retained in business, ex= net income do dividends increase or decrease owners equity - ✔✔decrease does investments by owners increase or decrease owners equity - ✔✔increase what is an income stmt - ✔✔analyzes economic performance for a specific period of time. statement of income. revenues, expenses, liabilities. equation for net income - ✔✔net income= revenues - expenses does revenues increase or decrease net assets - ✔✔increase does expenses increase or decrease net assets - ✔✔decrease what is revenue - ✔✔amount of assets created from sale. products, membership, software, hardware, etc what are expenses - ✔✔amount of assets consumed in generating revenues. wages, utilities, wholesale cost
statement of cash flow - ✔✔how cash changed from beginning to end and why cash in(receipts) and cash out(payments) from operating, investing, financing operational activity; inflow and outflow - ✔✔day to day activities operation cash inflow selling goods, providing services, operation cash outflow wages, utilities tax investing activity; inflow and outflow - ✔✔inflow selling buildings, selling land outflow buying buildings and land financial activity; inflow and outflow - ✔✔inflow borrowing $, receiving investments from owners outflow repaying loan, dividends, cash inflow - ✔✔receiving cash investments form owners, cash from bank when borrowing $, cash from customers, cash from sale of old machines, buildings, etc cash outflow - ✔✔paying to buy new machines, buildings, paying employee wages, suppliers for inventory purchases, interst on loans, principal on loans, dividends stmt of retained earnings - ✔✔accumulated profit and loss since business started. links income stmt and balance sheet together. from one accounting period to the next. beg. retained earnings + net income for period - dividends paid during what does sec do - ✔✔monitors securities market and financial disclosures
form 10k, what is it, where is it found, how often - ✔✔annual filing, tells what the business does and products and services sold/offered, risk of company, properties owned, legal proceedings, mngmt discussion fo how company is doing and future outlook, financial stmts, file w/i 60 days of fiscal year sec website form 10q - ✔✔quarterly unaudited financial reports covering the most current quarter filed quarterly cik- what does it stand for and what is it - ✔✔central index key unique indentifying number for each company in sec EDGAR system when looking at a balance sheet, what is used for property, current market value or original market value - ✔✔original market value current vs long term format - ✔✔current typically = within a year long term typically = more than a year what is a classified balance sheet - ✔✔list everything by current and long term. current is listed first then long term liquid - ✔✔cash available now
predicts how the compnay will do in the future compared to other companies in same industry common size financial stmts and types - ✔✔dividing one number by another to get a percentage horizontal and vertical horizontal analysis - ✔✔year to year. comparing percentages over time for same companyl year 2- year 1 / year 1 = % looking for large change in % and directional changes compared to sales how is a common size income statement created - ✔✔by dividing all income statements amounts for a given year by sales for that year what are vertical analysis of financial stmts - ✔✔displaying each line item as a percentage of another for comparison to other companies in the same industry how does vertical financial stmt analysis inform your understanding of a companies performance - ✔✔tells you what questions need to be asked about a companys performance vertical analysis allows an accountant to determine how much expenses are changing related to which line item on the income statement - ✔✔total sales what is a vertical analysis - ✔✔analyzing companies in the same industry at the same point in time
for income statement, what is equations for vertical analysis - ✔✔/ all # on stmt by biggest number. typically total revenue for balance sheet, what is equations for vertical analysis - ✔✔/ all of numbers by total assets (typically biggest number) how many years of income stmts and balance sheets does sec require - ✔✔3 years of income stmt 2 years of balance sheets how is each amount calculated in a comon size income statement - ✔✔each amt is expressed as a percentage of sale for the year is revenue cash or sales - ✔✔sales purpose of an income statement - ✔✔shows results of operations of a company over a period of time which is an expense: cash, accounts payable, cost of goods sold - ✔✔cost of goods sold what is the definition of an expense - ✔✔amount of assets consumed through business which group establishes financial accounting rules in us - ✔✔fasb- financial accounting standards board what is the impact of expenses on the account equation - ✔✔expenses decrease owners equity
sales budget - ✔✔what are we going to sell; start budget; forecasting sales, hardest part of the budgeting bc all other budgets follow this one. if inaccurate, the other budgets will be too. production budget- what is and equation - ✔✔how are we going to pay for forecasted sales, how many workers needed, etc. now we know how much we need we can determine how many units needed to make during this period by seeing how many units you already have on hand, and how many units you would like to have at the end units anticipated to sell + units needed on hand at end - how many you already have on hand direct materials budget- what is it and equation - ✔✔now that we know what we need and how much more to make we start to look at what materials are needed to make these products. raw materials we have and how much more we need rm needed this period + rm needed at end - rm on hand at start= how much more we need(y) x* how many units needed to make it - beginning inventory direct labor budget - ✔✔schedule of direct labor requirements for budget period. units needed to produce * hours of labor per unit / # of hours per week to work / 4 weeks in a month = how many employees needed Manufacturing Overhead Budget - ✔✔production cost other than direct labor and materials. supplies by office staff, salaries. cash collected from customer equation - ✔✔( current period revenue * current period collection rate) + cash collected from prev period sales.
cash payments to suppliers equation - ✔✔(current period pymts * current period pymt rate) + cash paid on prev period purchases budget layers - ✔✔sales budget --> production budget --> direct materials budget --> direct labor budget --> manufacturing overhead budget --> sell and admin expense budget manufacturing overhead budget fixed or variable - ✔✔both fixed and variable overhead cost. operating capital - ✔✔funds available for use in financing day to day activities decentralized company - ✔✔managers at all levels have authority to make decisions concerning operations what are managers responsible for - ✔✔only what they can control cost center - ✔✔manager controls cost incurred profit center - ✔✔manager controls revenue and cost investment center - ✔✔manager controls cost, revenue, and amt invested cost are variable if - ✔✔fluctuate with activity
Management Accounting - ✔✔product cost, breakeven analysis, budgeting, performance evaluation, outsource production steps of managerial accounting - ✔✔recognize needs, identify alts, eval choices, implement decisions, plan, decision making, controlling, expectation setting, gather results, reward performance, give feedback, analyze results again and repeat cost accountant - ✔✔prepare managerial accounting information prepare and analyze accounting info for internal decision making 3 major steps of managerial accounting - ✔✔plan, control, evaluate plan - ✔✔recogize problem, identify alts, analyze alts, chose best alt long term planning - ✔✔strategic plan and capital budgeting short term planning - ✔✔production and process prioritizing and operation budget controlling - ✔✔tracking actual performance, measure actual performance, budget vs actual, asses variance evaluating - ✔✔analyze results, provide feedback, reward performance, identify problems,
financial accounting is prepared according to - ✔✔GAAP What is the impact of expenses on the accounting equation - ✔✔Expenses decrease owners' equity Which type of account are accounts payable and notes payable both examples of - ✔✔liability How is gross profit computed - ✔✔Sales minus cost of goods sold For purposes of cash flow classification in the statement of cash flows, which item is an operating activity - ✔✔paying employees What is an account payable - ✔✔The amount owed by a company that purchased goods or services from a supplier on credit How could a period cost be reported in an income statement - ✔✔As an administrative expense How are the wages of cashiers classified in a merchandising company - ✔✔Selling expense How are wages of office staff in a company headquarters building classified - ✔✔Administrative expense What is the CVP equation? - ✔✔Sales - variable costs - fixed costs = profit A company reports these data:
How is the production cost per unit computed in a process costing system - ✔✔Amount of total production cost divided by the number of units completed during a particular period of time For which production process is process costing the appropriate costing method to use? - ✔✔Refining gasoline in a petroleum facility Which overhead allocation method should be used for a business that mass-produces breakfast cereal? - ✔✔Process costing What is the correct sequence for the flow of costs through a job order costing system - ✔✔Raw materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold Which type of company cannot use job order costing - ✔✔Petroleum refining plant year to year calculation - ✔✔=(year 2-year 1)/year one % sales equation - ✔✔=each row/largest number(typically net sales) product cost - ✔✔all cost incurred inside factory. direct materials, labor, manufacturing overhead. balance sheet period cost - ✔✔all cost incurred by company outside factory. expensed immediately to income statement. ceo salary, admin personnel cost, marketing and sales cost,
gross profit equation - ✔✔sales revenue-cost of goods sold operating income equation - ✔✔sales rev- cost of goods sold - operating expenses net income equation - ✔✔non operating rev + operating income - tax cvp - ✔✔cost - volume - profit examples of variable cost - ✔✔food, cooks, supplies, things that increase or decrease depending on the volume of sells examples of fixed - ✔✔rent, insurance, interest. remain constant no matter level of activity cost behavior - ✔✔how cost change in relation to change in activity level break even - ✔✔how much to sell to break even at 0 profit 0 loss sales revenue - variable cost- fixed cost = 0 stepped cost - ✔✔change in total in large amounts with changes in volume of activity. like large steps mixed cost - ✔✔both variable and fixed cost ex/ water bill. there is a fixed minimum charge plus a variable charge depending on how much you use.
