Accounting Randomness
Fundamental Accounting Equation:
Assets = Liabilities + Owners Equity
The role of Accounting in business.
What is to track financial events and transactions to ensure the business is financially sound?
BONUS POINTS:
What is a GAAP (Generally Accepted Accounting Principle)?
One describes income generated through business operations, while the other describes net income after deducting expenses from earning.
What is the difference between revenue and profit?
BONUS:
If a company wanted to predict the revenues, costs and expenses they could incur over the next 6-months to a year, they would develop a ___________.
Sales documents, purchasing documents, payroll records, travel expenses, etc. are all examples of this part of the Accounting System.
What is the INPUTS to an accounting system?
A financial plan that sets forth management's expectations and allocates the use of specific resources throughout the firm.
What is a budget?
BONUS:
What are the most common budgets? (Capital Budget, Cash Budget and Operating or Master Budget)
These are monies kept by the company to reinvest in the business.
What are retained earnings?
Three key documents that comprise a business's financial statement, summary of all the transaction that have occurred over a particular period.
What are the:
- Balance Sheet
- Income Statement
- Statement of Cash Flows
The position measures and reports costs of production, oversees units to ensure they're staying on budget, and designs strategies to minimize taxes and improve a company's finances.
What are Managerial Accountants or Financial Managers?
(Accountants generate the financial information and analysis.)
BONUS:
Chief Financial Officers are responsible for what?
These are the outputs from an accounting system.
What are financial statements like a Balance Sheet, Income Statement, Statement of Cash Flows, Annual Reports, etc.
_____ financing are funds raised through various forms of borrowing that must be repaid; while ____ financing are monies raised from within the firm, from operations or through the sale of ownership in the firm.
What are DEBT financing and EQUITY financing?
This is what you get when you add up the value of everything a business owns, including all equipment and inventory, incorporate current income streams, and subtract any debts or liabilities.
What is a business's fair purchase price?
Equal to what you owe plus what you own.
What are assets?
BONUS:
Describe tangible and intangible assets
The key needs for operational funds in business.
What are:
- Managing day-to-day needs
- Controlling credit operations
- Acquiring needed inventory
- Making capital expenditures
The net cash and cash equivalents transferred in and out of a company.
HINT: When a company's expenses exceed their receipts, they often have a problem with this.
What is Cash Flow?
The difference between a secured and unsecured loan.
What are Secured loans are backed by collateral, UNsecured loas do not require collateral.
The difference between Private vs Public vs Certified Public Accountants
Private: Works for a single firm, agency or non-profit
Public: Provides accounting services to individuals or businesses on a fee basis
Certified Public: Passed a series of exams by the American Institute of Certified Public Accountants
This includes the listing of assets, liabilities and owners' equity.
What is a Balance Sheet?
BONUS POINTS:
How are assets listed on the balance sheet? (In order of liquidity: current assets, fixed assets, intangible assets)
The first time a company offers to sell stock to the public is called __________.
What is a Initial Public Offering?
BONUS:
___________ is the problem of having insufficient start-up funds.
Calculated by taking a business's assets minus their liabilities.
What is Owners' Equity?
(Also referred to as Stockholder's Equity)
BONUS:
What are liabilities? (what business owes to others)
Most common are: Accounts Payable, Notes Payable, Bonds Payable
Factoring
What is the process of selling accounts receivable for cash.
This type of accounting is used to provide information and analysis to managers within an organization to assist them in decisions (reports on production costs, preparing department budgets, controlling costs to stay within budget, etc.).
What is Managerial Accounting?
A __________ is usually prepared as the first step in creating the balance sheet for a company. It summaries the debit and credit totals of general ledger accounts to ensure they match.
What is a Trial Balance sheet?
Terms such as 2/10, net 30 are used when implementing this type of short-term financing.
What is Trade Credit?
BONUS:
What is the difference between Trade Credit and a Line of Credit?
A financial statement that shows a company's income and expenditures.
What is an Income Statement?
BONUS:
What is the method of recording transactions as a debit or credit twice?
BONUS BONUS:
Resources left over or depleted are referred to as NET INCOME or NET LOSS.
Other ways to raise start-up capital...
What are Crowdfunding, Microfinancing, Asset-Based Lending, Incubators, Angel Investors