Accounting Final Exam Comprehensive

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18 Terms

1

What information can be found on the income statement?

Revenues/expenses, net income/net loss

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2

What distinguishes a multi-step income statement from a single-step income statement?

Single step: put all revenue in one category, doesn't have gross profit or operating income (revenue and expenses)

Multi-step: breaks down key parts and provides more information(day-to-day)

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3

What are the subcategories of assets and liabilities on the balance sheet? Identify two accounts in each subcategory.

Asset

Current

  • Cash

  • Account receivables 

  • Inventory 

  • Supplies 

Long term investments 

  • Note receivable 

  • Investments in stocks/bonds

  • Land and Building (not used in operations

Plant Assets

  • Land 

  • Building

  • Equipment

(accumulated depreciation)

Intangible 

  • Patent 

  • Copyright 

  • Trademark 

  • Franchise 

Liabilities 

Current 

  • Account payable 

  • Wages payable 

  • Note payable

  • Utilities payable 

Longterm 

  • Note payable 

  • Bond payable

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4

What is the cost of goods sold? How does cost of goods sold differ for a merchandiser and a manufacturer?

total direct costs a company incurs to produce the goods its selling

Merchandiser: cost of the inventory 

Manufacturer: product cost-dm-dl-MOH- FG inventory

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5

What is equity?

owners claim to an asset

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6

Where could Land be recorded on the balance sheet? Under what conditions would land be recorded in each of the categories?

Plant asset: investment,

inventory: real estate

Property plant/equipment: used in operations

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7

What is the difference between a calendar year and a fiscal year?

Calendar: January 1st- December 31st

Fiscal: the 12 month period that would most benefit your business

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8

What are the four sections of the statement of cash flows? What transactions affect the different sections?

Operating activities

Investing

Financing

Notes

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9

What is retained earnings? What activities affect retained earnings?

The cumulative effect of net income, net loss, and dividends over the life of the corporation.

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10

What are the primary components of stockholders equity?

Common stock and retained earnings

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11

What is the current ratio used for and how is it calculated? How does the quick ratio differ from the current ratio?

Measure of liquidity

Current assets / Current liabilities

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12

What are some differences between product costs and period costs?

Product: cost of goods sold,

Period: operating expenses, every single cost except for inventory

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13

What is the difference between depreciation, depletion, and amortization?

Depreciation: expensing off assets used in operations

Depletion: wasting resource

Amortization: intangible assets, reduce the copyright and trademark itself

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14

How do you calculate earnings per share? Where is earnings per share reported?

EPS= (net income-preferred dividends) / Avg common shares outstanding

Reported in the income statement

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15

How can you evaluate the performance of managers using a flexible budget? Which managers can be evaluated by which variances?

DM Cost Variance- purchasing

DM Efficiency Variance- production manager

DL Cost Variance - HR

DL Efficiency Variance- production manager

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16

Identify each step of the multi-step income statement. 

Sales

COGS

Gross Profit

Operating Expenses

Operating Income

Net Profit

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17

What are the components of a master budget? When is the master budget prepared? What is the first budget and what is the last budget?

Components:

  • Sales Budget

    Production Budget

    Purchases of Direct Material

    Direct Labor

    CGS

    Selling and Admin

    Cash Budget

    Income Statement

    Balance Sheet

Prepared before the period begins

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18

What are some key performance indicators (KPI) that can be used to evaluate a company? What do the KPIs mean?

Current Ratio: a measure of liquidity

Inventory Turnover Ratio: how well the resources are being used

Debt Ratio: percentage of assets financed with debt

Profit Margin Ratio: percent of every dollar remaining after covering all costs

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