Accounting UARK Exam 1

Retained Earnings:

The portion of a company's profit that is not paid out as dividends but is reinvested in the business or used to pay off debt.

Revenue:

Cash received from the sale of products or services. It represents the total amount earned by the company before expenses.

Dividend:

A distribution of a portion of a company’s earnings to shareholders.

Accounting Equation:

Assets = Liabilities + Stockholders’ Equity. This equation must always balance as it reflects the financial position of a company.

Asset Source:

An asset increases, and a corresponding claims account increases`

Asset Use:

An asset decreases, and a corresponding claims account decreases.

Asset Exchange

One asset increases, and another decreases.

Claims Exchange:

: One claims account increases, and another decreases.

Accounting Event:

An economic occurrence that changes an enterprise's assets, liabilities, or stockholders’ equity.

Financial Accounting:

Focuses on external users, providing aggregated financial information.

Managerial Accounting:

Focuses on internal users, providing detailed, forward-looking information for planning and control.

Reporting Entity

A unit that reports financial information, typically a business or organization.

Liability:

A company's financial obligation, usually in the form of debts or obligations to outside parties.

G.A.A.P.

Generally Accepted Accounting Principles, the standard framework for financial accounting in the U.S.

Balance Sheet:

Shows a company’s assets, liabilities, and equity.

Income Statement:

Shows a company’s revenue, expenses, and net income.

Statement of Cash Flows:

Shows cash inflows and outflows from operations, investing, and financing activities.

Statement of Retained Earnings:

Shows changes in retained earnings over a period of time.

Direct Labor:

Labor costs directly associated with manufacturing a product. Can be traced to specific products.

Manufacturing Overhead:

Indirect costs associated with manufacturing that cannot be traced to specific products (e.g., utilities, depreciation).

Internal Users:

Managers, employees who need detailed, timely information for decision-making.

External Users:

: Investors, creditors, government agencies who need general, periodic reports.

Manufacturing Companies

Companies that produce goods.

Service Companies

Companies that provide services rather than physical products.

Cost of Goods Sold (COGS):

The direct costs of producing the goods sold by a company (direct materials, direct labor, manufacturing overhead).

Product Costs:

Costs that are part of manufacturing a product (direct materials, direct labor, overhead).

Period Costs:

Costs not related to production (selling, general, and administrative costs).

Unit Cost Calculation:

Total Cost/Units Produced

Raw Materials Used:

Beginning Raw Materials + Purchases - Ending Raw Materials

Cost of Goods Manufactured Equation

Direct Materials + Direct Labor + Manfacturing Overhead + Beginning WIP - Ending WIP

Cost of Goods Sold (COGS):

Beginning Finished Goods + Costs of Goods Manfactured - Ending Finished Goods inventroy

Tax System:

A system used by governments to collect revenue from individuals and businesses to fund public services.

Tax Filing:

The form you file to report income, deductions, and tax owed (e.g., IRS Form 1040).

Tax Filing Extension:

Individuals can file for an extension to submit their taxes, typically for up to six months.

What is the Largest Source of Tax revenue for the U.S?

Individual income taxes

Sin Tax:

Taxes levied on goods deemed harmful to society, like tobacco and alcohol.

What is and is not a Tax:

A compulsory (required) financial charge

Decisions Influenced by Taxes

Business investment, purchasing behavior, and decisions on savings and expenditures.

Average Tax Rate

Total Taxes Owed/Total Taxable Income

Taxes Owed Calculation

Taxable Income * Tax Rate

Effective Tax Rate Calculation

Total Taxes/Total Income