Accounting Final Exam Comprehensive

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