FINANCIAL ACCOUNTING
What financial statement shows a company's assets, liabilities, and equity?
The Balance Sheet
What is the main purpose of managerial accounting?
Provide information that helps managers make decisions, plan, and control business operations.
What does IRS stand for?
Internal Revenue Service
Certified Public Accountant
What is the basic accounting equation?
Assets = Liabilities + Equity
What is the normal balance of an asset account?
Debit
What are fixed costs?
Costs that generally stay the same regardless of the level of production or sales.
What is a tax deduction?
An amount that reduces taxable income.
What type of accountant examines financial records?
An auditor.
What does GAAP stand for?
Generally Accepted Accounting Principles
If a company buys equipment for cash, what happens to total assets?
Cash decreases, equipment increase. total assets stay the same.
What is the difference between fixed and variable costs?
Fixed costs generally stay constant, while variable costs change based on production or activity level.
What is an audit?
An independent examination of financial information and records.
Which Big 4 accounting firm is commonly abbreviated as EY?
Ernst & Young (EY)
What is the accounting term for money a company owes to its suppliers?
Accounts Payable
What financial statement reports revenues and expenses?
The Income Statement
What is the break-even point?
A tax deduction reduces taxable income, while a tax credit directly reduces the amount of tax owed.
Name all four Big 4 accounting firms.
- Deloitte
- EY (Ernst & Young)
- KPMG
- PwC (PricewaterhouseCoopers)
What does a debit mean?
A debit is an entry on the left side of an account. Depending on the account, it can increase or decrease the balance.
A company receives $5,000 cash for services it will provide next month. What account is credited?
Unearned Revenue
A product sells for $50, has variable costs of $30, and fixed costs of $10,000. How many units must be sold to break even?
500 units
$50 - $30 =$20.00 contribution margin per unit
$10,000 / $20 =500 units
What is the purpose of an independent financial statement audit?
To provide reasonable assurance that the financial statements are fairly presented and free from material misstatement.
What is the difference between public accounting and private accounting?
Public accountants work with external clients, while private accountants work within a company.
What is the process of recording a financial transaction called?
Journal entry.