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What information can be found on the income statement?
Revenues/expenses, net income/net loss
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)
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
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
What is equity?
owners claim to an asset
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
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
What are the four sections of the statement of cash flows? What transactions affect the different sections?
Operating activities
Investing
Financing
Notes
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.
What are the primary components of stockholders equity?
Common stock and retained earnings
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
What are some differences between product costs and period costs?
Product: cost of goods sold,
Period: operating expenses, every single cost except for inventory
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
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
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
Identify each step of the multi-step income statement.
Sales
COGS
Gross Profit
Operating Expenses
Operating Income
Net Profit
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
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