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Accounting MBA 620 New Exam Questions And
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4 financial statements - ANSWER balance sheet, income statement, retained earningsstatement and statement of cash flow
Balance sheet - ANSWER presents a snapshot of the reporting entity's financial positionat a point in time, shows the organizations liabilities, assets and equity
Income statement - ANSWER presents the economic activities conducted by thereporting entity over a period of time
Profit occurs - ANSWER when revenue exceeds cost loss occurs when - ANSWER revenue is less than cost statement of shareholders equity - ANSWER statement of shareholders equity presentsa reconciliation of the owners interest in the organization -- shows increase or decrease in owners equity and how that change occurred statement of cashflows - ANSWER presents the sources of an organizations cash flows,where and how cash came from and how the cash was expended
companies activities can be classified as - ANSWER operating, investing or financing building blocks in accounting - ANSWER professional standardsregulatory requirements
corporate governance professional standards - ANSWER ethics in accountinggenerally accepted accounting principles (GAAP)
regulatory requirements - ANSWER securities and exchange commission (SEC) Sarbanes Oxley Act Sarbanes Oxley act - ANSWER effective financial reporting depends on sound ethicalbehavior (2002)
Corportate Governance - ANSWER board of directors audit committee cost principle (historical) - ANSWER dictates that companies record assets at their cost historical principle issues - ANSWER reported at cost when purchased and also over thetime the asset is held, cost easily verified whereas market value is subjective matching principle - ANSWER revenue is matched with resources spent to generate thatrevenue
monetary unity assumption - ANSWER include in the accounting records onlytransaction data that can be expressed in terms of money economic entity assumption - ANSWER requires that activities of entity be kept separateand distinct from the activities of its owner and all other economic entities tools of analysis - ANSWER horizontal, vertical, ratio
liquidity - ANSWER measure the short-term ability of the company to pay its maturingobligations and to meet unexpected needs for cash
current ratio - ANSWER measures organizations' working capital availability as it cangenerate cash in order to meet current obligations
current assets/ current liabilities = current ratio acid test ratio - ANSWER measures immediate liquidity cash+short term investments +receivables (net)/current liabilities =acid test receivables turnover - ANSWER measures the number of times, on average, thecompany collects receivables net credit sales/ average net receivables = receivables turnover inventory turnover - ANSWER measures number of times on average the inventory issold during the period costs of good sold/ average inventory = inventory turnover days in inventory- ANSWER 365/ ___times = _____ days profitability- ANSWER measure the income or operating success of a company for agiven period of time
profit margin- ANSWER measures the percentage of each dollar of sales that results innet income net income/ net sales = profit margin asset turn over- ANSWER measures how efficiently a company uses its assets togenerate sales
net sales/ average assets = asset turn over return on assets - ANSWER an overall measure of profitabilitynet income/average assets = return on assets
return on common stockholders' equity - ANSWER shows how many dollars of netincome a company earned for each dollar of common stockholders' equity
net income- preferred dividends/ average common stockholders' equity earnings per share - ANSWER measures the net income earned per share of commonstock net income / weighted average common shares outstanding price earnings ratio - ANSWER reflects investors' assessments of a companys futureearnings market price per share of stock/ earnings per share dividends payout ratio - ANSWER measures the percentage of earnings distributed inthe form of cash dividends
debt to total asset - ANSWER debt/asset times interest earned - ANSWER income before income taxes and interest expense/interest expense
T account - ANSWER used to reflect increases and decreases to individuals accounts BASE - ANSWER beginning balance of account
Return on equity (ROE)-ANSWER most common analysis metric used by managers andinvestors-relates net income to average total stockholders' equity ROE= net income/ average stockholders eqiuty Does accounting mattter? - ANSWER yes! reports provide information to the marketwhen accounting released the sentiment in those reports are then correlated with changes in the stock price basic accounting theory - ANSWER a basic set of concepts and related principles thatexplain and guide the accountants actions in - identifying, measuring and communicating economic income should accounting income = economic income - ANSWER no- economic income takesinto account human capital and accounting income takes into account the past
business entity - ANSWER be reported separately going concern - ANSWER expect the business will continue operation into theforeseeable future
monetary value - ANSWER measure value and provide someway thats consistent forvaluing what company does
periodicity - ANSWER operations can be divided into periods to assist in themeasurement of a business's performance
substance over form - ANSWER record substance rather than legal or technical form consistency - ANSWER use the same accounting techniques each year historical cost - ANSWER report activities at historical cash value at the time the eventtook place
fair market value - ANSWER report the value of a transaction or asset / liability at thevalue that one would receive in the market
recognition - ANSWER recording transaction based on accounting rules - accrual basis realization - ANSWER actual paying of cash revenue recognition - ANSWER report revenue when earned and right to pay expense recognition - ANSWER report expense obligations when obligated to pay conservatism - ANSWER when faced with decision of equally likely outcomes, chooseone to minimize profit
full and fair disclosure - ANSWER disclose anything that would affect an informedinvestor in making decision
3 forms of business org - ANSWER 1. sole propietorship
- partnership a. passive b. active3. corporation a. private b. public - for or non profit
5 types of accounts - ANSWER 1. Assets- resources2. Liabilities- obligations
- Equity- contributed capital, retained earnings4. Revenue- earned
- Expenses- reported cost for earnings
other long term liabilities contributed capital - ANSWER common stock, additional paid in capital, preferredstock, treasury stock, retained earnings, accumulated other comprehensive income or loss stock holders equity is the - ANSWER value of the company determined by generallyaccepted accounting principles (GAAP) and is commonly reffered to as the company's book value market value - ANSWER computed by multiplying the number of outstanding commonshares by the company's stock price
income statement - ANSWER reports revenues earned during a period and the expensesincurred to produce those revenues, and the resulting net income or loss
structure of income statement - ANSWER revenues- Costs of goods sold -----------------------gross profit
operating profit- non-operating expenses (+ non operating revenues)
income from continuing operations -/+discontinued operations, net of tax =net income
operating expenses - ANSWER the usual and customary costs a company incurs tosupport its operating activities
non operating expenses - ANSWER related to the company's financing and investingactivities
revenue recognition - ANSWER recognize revenue for goods and services provided tocustomers at an amount expected to be received
- does not imply the receipt of cash
- revenue is recognized when the company has done what it is obligated to do under thesales contract
expense recognition - ANSWER recognize expenses when incurred -companies recognize expense when it is incurred even if no cash is paid discontinued operations - ANSWER 1. the net income (loss) from the segments businessacitivites prior to sale and2. any gain or loss on the actual sale of business gross profit margin - ANSWER influenced by both the selling price of company'sproducts and the cost to make or buy those products
