Financial Accounting Concepts and Standards, Exams of Decisione Making for Managers

Download Financial Accounting Concepts and Standards and more Exams Decisione Making for Managers in PDF only on Docsity! C213-Accounting for Decision Makers Exam 222 Questions with Verified Answers for 2024. 1. Accounting - ANS A system of providing "quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions." 2. American Institute of Certified Public Accountants (AICPA) - ANS The professional organization of certified public accountants in the United States. 3. Balance Sheet - ANS Document which reports the resources of a company (the assets), the company's obligations (the liabilities), and the owners' equity, which represents how much money has been invested in the company by its owners. 4. Bookkeeping - ANS The preservation of a systematic, quantitative record of an activity. 5. Certified Public Accountant - ANS A person who has taken a minimum number of college-level accounting classes, has passed the dreaded CPA exam, and has met other requirements set by his or her state. 6. Financial Accounting - ANS The name given to accounting information provided for and used by external users. 7. Financial Accounting Standards Board (FASB) - ANS Governmental body that sets accounting standards in the United States. 8. Financial Statements - ANS The three primary financial information documents: the balance sheet, income statement, and statement of cash flows. 9. Income Statement - ANS This document reports the amount of net income earned by a company during a period, with annual and quarterly income statements being the most common. 10. Internal Revenue Service (IRS) - ANS The government agency responsible for tax collection and tax law enforcement. 11. International Accounting Standards Board (IASB) - ANS An independent, international body formed to develop worldwide accounting standards. 12. International Financial Reporting Standards (IFRS) - ANS The accounting standards produced by the IASB. 13.Managerial Accounting - ANS The name given to accounting systems designed for internal users. P a g e 1 | 16 14.Public Company Accounting Oversight Board (PCAOB) - ANS A private, non- profit organization that effectively serves as an arm of the SEC in registering, inspecting, and disciplining the auditors of all publicly traded companies. 15.Statement of Cash Flows - ANS This document reports the amount of cash collected and paid out by a company in the following three types of activities: operating, investing, and financing 16.Accounting Equation - ANS Assets = Liabilities + Owners' Equity 17.Accumulated Other Comprehensive Income - ANS The source of these increased assets 18.Assets - ANS Assets are the firm's economic resources, formally defined as "probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events 19.Balance Sheet - ANS A statement of financial position shows the financial resources the company owns or controls and the claims on those resources 20.Book Value - ANS The book value of an asset is the asset's cost minus the asset's accumulated depreciation. 21.Comparability - ANS Tnformation that becomes much more useful when it can be related to a benchmark or standard 22.Conservatism - ANS a pervasive factor in accounting, can be summarized as follows: When in doubt, recognize all losses but don't recognize any gains. 23.Consistency - ANS The consistency principle states that, once you adopt an accounting principle or method, continue to follow it consistently in future accounting periods. 24.Disclosure - ANS 25.Earnings Per Share (EPS) - ANS EPS tells the owner of one share of stock what he or she really wants to know 26.Entity Concept - ANS The idea that personal financial activity is kept separate from business financial activity 27.Expenses - ANS The amount of assets consumed from the performance of business operations and thus are the opposite of revenues 28.External Audit - ANS audit conducted by external (independent) qualified accountant(s) 29.Financing Activities - ANS Those activities whereby cash is obtained from, or repaid to, owners and creditors P a g e 2 | 16 60.Common-size Financial Statements - ANS All amounts for a given year being shown as a percentage of that denominator for the year. 61.Current Ratio - ANS A comparison of current assets (cash, receivables, and inventory) with current liabilities. It is computed by dividing total current assets by total current liabilities. 62.Debt Ratio - ANS A frequently used measure of leverage, computed as total liabilities divided by total assets. 63.Debt-to-equity Ratio - ANS Total liabilities divided by total equity and is interpreted as the number of dollars of borrowing for each dollar of equity investment 64.DuPont Framework - ANS A systematic approach to identifying general factors causing ROE to deviate from normal. 65.Financial Ratios - ANS Relationships between financial statement amounts 66.Financial Statement Analysis - ANS Areas in which additional data must be gathered, including details of significant transactions, market share information, competitors' plans, and customer demand forecasts. 67.Fixed Asset Turnover - ANS Sales divided by average fixed assets and is interpreted as the number of dollars in sales generated by each dollar of fixed assets. 68.Leverage - ANS Borrowing that allows a company to purchase more assets than its stockholders are able to pay for through their own investment. 69.Liquidity - ANS A company's ability to pay its debts in the short run 70.Margin - ANS The profitability of each dollar in sales 71.Number of Days' Sales in Inventories - ANS Calculated by dividing average inventory by average daily cost of goods sold and is interpreted as the average number of days of sales that can be made using only the supply of inventory on hand. 72.Price-earnings Ratio - ANS an equity valuation multiple. It is defined as market price per share divided by annual earnings per share. 73.Return On Assets - ANS Net income divided by total assets and is the number of pennies of net income generated by each dollar of assets. 74.Return On Equity - ANS The overall measure of the performance of a company. P a g e 5 | 16 75.Return On Sales - ANS Net income divided by sales and is interpreted as the number of pennies in profit generated from each dollar of sales. 76.Turnover - ANS The degree to which assets are used to generate sales 77. "Other Assets" - ANS Long-term assets that are not suitable for reporting under any of the previous classifications 78.Accounts Payable - ANS The flip side of accounts receivable—when one company sells on credit, creating for itself an account receivable, the company on the other side of the transaction is buying on credit, creating an account payable. 79.Accounts Receivable - ANS Amounts owed to a business by its credit customers and are usually collected in cash within 10 to 60 days. 80.Accumulated Depreciation - ANS Reflects the wear and tear, or depreciation, of these items since they were originally purchased. 81.Accumulated Other Comprehensive Income - ANS The grouped together and reported changes which companies experience increases and decreases in equity each year because of the movement of market prices or exchange rates 82.Additional Paid-in Capital - ANS Invested by stockholders that exceeds the par value of the issued shares. 83.Asset - ANS Probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events. 84.Asset Mix, - ANS The proportion of total assets in each asset category, is determined to a large degree by the industry in which the company operates. 85.Balance Sheet - ANS A listing of an organization's assets and of its liabilities at a certain time. 86.Capital Lease Obligations - ANS A long-term liability in the balance sheet. 87.Cash - ANS Coins and currency as well as the balances in company checking and savings accounts. 88.Common Stock - ANS Stockholders' equity investment 89.Current Assets - ANS Cash, accounts receivable, and inventory. 90.Current Liabilities - ANS Those obligations expected to be paid within one year, the most common being accounts payable. 91.Current Portion of Long-term Debt - ANS Some liabilities, such as mortgages, are payable in equal monthly installments over a specified number of years. P a g e 6 | 16 The portion of these liabilities that is payable within 12 months from the balance sheet date. 92.Deferred Income Tax Liability - ANS The income tax expected to be paid in future years on income that has already been reported in the income statement but which, because of the tax law, has not yet been taxed. 93.Derivative - ANS A financial instrument, such as an option or a future, that derives its value from the movement of a price, an exchange rate, or an interest rate associated with some other item. 94.Disclosure - ANS Convey the details in a narrative note without ever including anything in the financial statements themselves. 95.Equity - ANS Residual interest in the assets of an entity that remains after deducting its liabilities. 96.Executory Contract, - ANS It is an exchange of promises about the future. 97.Financing Mix - ANS The percentage of total financing (liabilities plus equity) in each individual category. 98. Intangible Assets - ANS Assets that have no physical or tangible characteristics. 99. Inventory - ANS The name given to goods held for sale in the normal course of business. 100. Investment Securities - ANS Composed of publicly traded stocks and bonds. 101. Liability - ANS Probable future sacrifice of economic benefit arising from a present obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. 102. Long-term Debt - ANS Long-term notes, bonds, mortgages, and similar obligations on the balance sheet 103. Long-term Investments - ANS Those assets that you expect to still be around next year when you prepare the balance sheet again. 104. Noncontrolling Interest, - ANS Arises when a corporation has subsidiaries that are not 100 percent owned by the corporation. 105. Par Value - ANS The market value of the shares at issuance. 106. Preferred Stock - ANS Stockholders' equity investment 107. Prepaid Expenses - ANS Payments in advance for business expenses. P a g e 7 | 16 138. Revenue Recognition - ANS a cornerstone of accrual accounting together with matching principle. They both determine the accounting period, in which revenues and expenses are recognized. 139. Single-step Income Statement - ANS With this format, all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between total revenues and total expenses. 140. Cash Equivalents - ANS Short-term, highly liquid investments such as Treasury bills, commercial paper, and money market funds. 141. Direct Method - ANS reporting the information contained in the last column of the adjustment worksheet 142. Financing Activities - ANS Obtaining resources from owners and providing them a return on their investment, and obtaining resources from creditors and repaying those borrowings 143. Indirect Method - ANS A method for creating a statement of cash flows a company may use during any given reporting period. The indirect method uses accrual accounting information to present the cash flows from the operations section of the cash flow statement. 144. Investing Activities - ANS Cash inflows and outflows from (1) acquiring and selling productive assets such as property, plant, and equipment, (2) acquiring and selling investment securities, and (3) lending money and collecting on those loans 145. Non-cash Investing and Financing Activities - ANS Some investing and financing activities affect a company's financial position but not the company's cash flows during the period. 146. Operating Activities - ANS All transactions relating to a company's delivering or producing its goods for sale and providing its services 147. Pro Forma, - ANS A prediction of what the actual cash flow statement will look like in future years if the operating, investing, and financing plans are implemented. 148. Statement of Cash Flows, - ANS Summarize a company's cash flows for a period of time. 149. Cash Budget - ANS An important tool in helping management plan its cash needs. This discussion briefly introduces you to budgeting cash receipts. 150. Audit Committee - ANS Members of a company's board of directors who are responsible for dealing with the external and internal auditors. 151. Control Activities - ANS Policies and procedures used by management to meet their objectives. P a g e 10 | 16 152. Control Environment - ANS The actions, policies, and procedures that reflect the overall attitudes of top management about control and its importance to the entity. 153. Control Procedures - ANS Policies and procedures used by management to meet their objectives. 154. Detective Controls - ANS Internal control activities that are designed to detect the occurrence of errors and fraud. 155. External Auditors - ANS ...Independent CPAs who are retained by organizations to perform audits of financial statements. 156. GAAP Oval - ANS A diagram that represents the flexibility a manager has, within GAAP, to report one earnings number from among many possibilities based on different methods and assumptions. 157. Generally Accepted Auditing Standards (GAAS) - ANS Auditing standards developed by the PCAOB for public companies and AICPA for private companies. 158. Income Smoothing - ANS The practice of carefully timing the recognition of revenues and expenses to even out the amount of reported earnings from one year to the next. 159. Independent Checks - ANS Procedures for continual internal verification of other controls. 160. Internal Auditors - ANS An independent group of experts (in controls, accounting, and operations) who monitor operating results and financial records, evaluate internal controls, assist with increasing the efficiency and effectiveness of operations, and detect fraud. 161. Internal Control Structure - ANS Policies and procedures established to provide management with reasonable assurance that the objectives of an entity will be achieved. 162. Internal Earnings Targets - ANS Financial goals established within a company. 163. Organizational Structure - ANS Lines of authority and responsibility. 164. Physical Safeguards - ANS Physical precautions used to protect assets and records. 165. Preventative Controls - ANS Internal control activities that are designed to prevent the occurrence of errors and fraud. P a g e 11 | 16 166. Public Company Accounting Oversight Board (PCAOB) - ANS Board of five full-time members established by the Sarbanes-Oxley Act to oversee the accounting and auditing profession. 167. Sarbanes-Oxley Act - ANS A law passed by Congress in 2002 that gives the SEC significant oversight responsibility and control over companies issuing financial statements and their external auditors. 168. Securities and Exchange Commission (SEC) - ANS The government body responsible for regulating the financial reporting practices of most publicly owned corporations in connection with the buying and selling of stocks and bonds. 169. Segregation of Duties - ANS A strategy to provide an internal check on performance through separation of authorization of transactions from custody of related assets, operational responsibilities from record-keeping responsibilities, and custody of assets from accounting personnel. 170. Capital Budgeting - ANS Systematic planning for long-term investments in operating assets. 171. Controlling - ANS Implementing management plans and identifying how plans compare with actual performance. 172. Cost-volume-profit (C-V-P) Analysis - ANS Techniques for determining how changes in revenues, costs, and level of activity affect the profitability of an organization. 173. Differential Costs - ANS Future costs that change as a result of a decision; also called incremental or relevant costs. 174. Direct Costs - ANS Costs that are specifically traceable to a unit of business or segment being analyzed. 175. Direct Labor - ANS Wages paid to those who physically work on direct materials to transform them into a finished product and are traceable to specific products. 176. Direct Materials - ANS Materials that become part of the product and are traceable to it. 177. Evaluating - ANS Analyzing results, rewarding performance, and identifying problems. 178. Fixed Costs - ANS Costs that remain constant in total, regardless of activity level, over a certain range of activity. 179. Indirect Costs - ANS Costs normally incurred for the benefit of several segments within the organization; sometimes called common costs or joint costs. P a g e 12 | 16 208. Method - ANS A method of segregating the fixed and variable components of a mixed cost by plotting on total costs at several activity levels and drawing a regression line through the points. 209. Mixed Costs - ANS Costs that contain both variable and fixed costs components. 210. Operating Leverage - ANS The extent to which fixed costs replace variable costs as part of a company's cost structure; the higher the proportion of fixed costs to variable costs, the faster income increases or decreases with changes in sales volume. 211. Per-unit Contribution Margin - ANS The excess of the sales price of one unit over its variable costs. 212. Profit Graph - ANS A graph that shows how profits vary with changes in volume. 213. Regression Line - ANS On a scattergraph, the straight line that most closely expresses the relationship between the variables. 214. Relevant Range - ANS The range of operating level, or volume of activity, over which the relationship between total costs (variable plus fixed) and activity level is approximately linear. 215. Return On Sales Revenue - ANS A measure of operating performance; computed by dividing net income by total sales revenue. Similar to profit margin. 216. Sales Mix - ANS The relative proportion of total sales dollars (or total units sold) that is represented by each of a company's products. 217. Scattergraph - ANS A method of segregating the fixed and variable components of a mixed cost by plotting on total costs at several activity levels and drawing a regression line through the points. 218. Stepped Costs - ANS Costs that change in total in a stair-step fashion (in large amounts) with changes in volume of activity. 219. Target Income - ANS A profit level desired by management. 220. Variable Cost Rate - ANS The change in cost divided by the change in activity; the slope of the regression line. 221. Variable Costs - ANS Costs that change in total in direct proportion to changes in activity level. P a g e 15 | 16 222.Visual-fit - ANS A method of segregating the fixed and variable components of a mixed cost by plotting on total costs at several activity levels and drawing a regression line through the points. P a g e 16 | 16