ACC 220 Exam 1 (Ch 12 & 14)

The primary purpose of the statement of cash flows is to provide __________ about a company's ________ __________ and ________ ___________ during a period.

information, cash receipts, and cash payments

What are the three classifications of cash flows?

Operating activities, Investing activities, and Financing activities.

Operating activities relate to the __________ of the company.

operations

What income statement items are included in operating activities?

Revenues, expenses, gains & losses.

We use the (direct/indirect) method to prepare the Statement of Cash Flows.

Indirect

What else is reported in the operating activities section?

Changes in current assets and current liabilities.

Investing activities are activities of obtaining the _________ to operate the company.

assets

In investing activities, changes in __________ - ____________ _________________ and ___________ - __________ __________________ are reported her.

Long term investments, and long term assets (PP&E) and sometimes notes receivable

Financing activities is a way to raise _________ for company operations.

funds

In financing activities, changes in ________ _________ ____________ and ______________ ___________ are recorded.

long-term liabilities and stockholders equity

Along with Operating, Investing, and Financing activities, the statement of cash flows will also report ________________ _______ - _________ __________________.

Significant non-cash activities

A significant non-cash activity is one that is a significant investing or financing activity that does not involve ________.

Cash

Examples of significant non-cash activities include:

- Direct issuance of common stock to purchase assets (exchange)

-Conversion of bonds into common stock

- Issuance of a debt to purchase assets (no cash transaction)

- Exchange of plant assets

Significant non-cash is usually reported where?

At the bottom of the statement, or in the notes to the financial statements.

What is a key word when determining if a transaction is significant non-cash?

exchange or simply the word cash! If it involves cash, it falls in another category.

How many methods are there to prepare the statement of cash flows?

two

What are the two methods to preparing a statement of cash flows?

direct and indirect

What are the steps in using the indirect method to prepare a statement of cash flows?

-Determine the net cash provided/used by operating activities

-Analyze changes in non-current asset, liability, and stockholders equity accounts and record as investing, financing, or non-cash activities

-Compare the net change in cash on the statement of cash flows with the change in the cash account recorded on the balance sheet to make sure the accounts match.

(T/F?) Both the indirect method and direct method give you the same answer.

True

What section of the statement of cash flows is affected by the method chosen?

The operating activities section

The direct method reports operating ___________ and __________.

receipts, payments

The indirect method adjust ______ _______ for items that do NOT affect cash.

Net income

What are some of the reasons that a company may use the indirect method over the direct method?

1. it is easier and less costly
2. it focuses on the difference between net income and net cash flow from operating activities.

What is the most important category on the statement of cash flows, and why?

Operating activities section

It shows the cash provided by company operations

For a statement of cash flows, we convert numbers from an ________ basis to a ________ basis.

accrual (financial statements are prepared this way), cash

What is the format of the operating activities section?

1. Start with net income/loss

2. deduct gains and add losses

3. Analyze changes to current assets and current liability accounts (all except cash)

When analyzing changes in current assets and liabilities in the operating section, what do you do to each increase or decrease in a current asset/liability?

- An increase in a current Asset will be a DEDUCTION

- A decrease in a current asset will be an ADDITION

- An increase in a current liability will be an ADDITION

- A decrease in a current liability will be a DEDUCTION

If the total amount in the operating activities section is positive, it will be "net cash _____________ by operating activities"

provided

If the total amount in the operating activities section is negative, it will be "net cash _____________ by operating activities"

used

When looking at financial statements, a decrease in the amount of money in an equipment account represents a ________ of equipment

Sale

______________ accounting provides economic and financial information for managers and internal users

managerial accounting

(T/F?) Both managerial and financial accounting deal with the economic events of a business.

True

(T/F?) The primary users of reports regarding managerial accounting are officers and managers

True

How frequent are internal reports generated in managerial accounting?

As needed

What is the purpose of generating reports in managerial accounting?

It is so that companies can make specific decisions.

Reports are very _____________

detailed.

Are there independent audits in Managerial Accounting?

No

What are the three management functions?

Planning, Directing, and Controlling

__________ information is vitally important to a manufacturing company. In order to be a successful company, companies need to understand the relationship between cost and profits.

Cost

Planning involves looking ahead and establishing ____________ and _____________.

Goals, objectives

________________ involves coordinating activities and human resources to provide smooth running operations. (Day to day operations)

Directing

(T/F?) Controlling is keeping goals on track/determining whether goals are met.

True

What are the three manufacturing costs? (Their name and Abreviation)

Direct Labor (DL)
Direct Materials (DM)
Manufacturing Overhead (MOH)

Direct materials are raw materials (basic ____________ & ________) used in the manufacturing process.

materials, parts

Indirect materials are insignificant parts or they are impractical to be used to finish the product. Indirect materials are classified as ___________________.

Manufacturing Overhead (MOH)

Direct Labor is the ______________ of _______________ ____________________.

work, factory, employees.

(T/F?) Direct labor is work by factory employees that can be directly associated with converting raw materials into finished goods.

True

Indirect labor is employees not relevant to the factory. An example of this would be ____________ _____________. (Classified as Manufacturing Overhead)

Janitorial Staff

Costs that are directly associated with manufacturing the finished product and includes all manufacturing cost that are not direct materials/direct labor are classified as __________________ _________________

Manufacturing Overhead

"Assembly line worker" or "Production worker" automatically classifies as ______ _________

Direct Labor (DL)

Product Cost are the manufacturing cost. Therefore, product cost consist of _______________ ________________, _______________ _____________, and ____________________ ______________.

Direct Labor, Direct Materials, Manufacturing Overhead.

Period cost include all selling and administrative expenses (also known as _____________ expenses)

operating

Cost of goods sold for a manufacturer formula is:

Beginning Finished Goods Inventory

+ Cost of goods Manufactured

=Cost of Goods Available for sale

- Ending Finished Goods Inventory

= Cost of Goods Sold

What is finished goods inventory? (FG)

Cost of completed goods on hand ready to sell.

Cost of Goods Manufactured Formula

Beginning Work in Process Inventory

+ Total Manufacturing Cost

=Total Cost of Work in Process

-Ending Work in Process Inventory

Cost of goods manufactured

What are the inventory accounts of a manufacturer represented on a balance sheet?

Finished Goods Inventory
Raw Materials Inventory
Work In process Inventory