Business Test- Chapters 8 & 9

Stockholders typically want to view a firm's accounting information to
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Terms in this set (35)
Stockholders typically want to view a firm's accounting information to
know if management has generated a strong-enough return on investment
_____ work within their organizations to detect problems such as waste, mismanagement, embezzlement, and employee theft
Internal auditors
Generally accepted accounting principles (GAAP) are a set of accounting standards that is used in the
preparation of financial statements
In the United States, the ultimate legal authority to set and enforce accounting standards lies with the _____
Securities and Exchange Commission
In the United States, the Securities and Exchange Commission (SEC) has delegated the responsibility for developing accounting standards to a private organization called the _____
Financial Accounting Standards Board
The major responsibilities involved in financial accounting are the preparation of the
balance sheet, income statement, and statement of cash flows
In the context of financial statements, _____ are debts that come due within a year of the date on the balance sheet
current liabilities
_____ refers to the claims owners have against their firm's assets
Stockholders' equity
In the context of the balance sheet, which of the following serves to be the rationale behind the accounting equation?
. A firm must finance the purchase of their assets, and the owners and nonowners should contribute toward it
Increases in a firm's assets that result from the sale of goods, provision of services, or other activities intended to earn income are referred to as _____
revenue
In the context of statement of cash flows, cash flows from investing activitiesshow the amount of cash received from the sale of fixed assetsIn the context of an independent auditor's report, _____ indicates that the auditor believes the financial statements are seriously flawed and that they may be misleading and unreliablean adverse opinionIn the context of external audits of financial statements, which of the following statements is true of CPA firms?They must be independent of the companies they are auditingThe Securities and Exchange Commission requires publicly traded corporations to provide _____comparative financial statementsIn the context of interpreting financial statements, using comparative statements to identify changes in key account values over time is called _____horizontal analysis_____ are budgets that identify projected sales and production goals and the various costs the firm will incur to meet these goalsOperating budgetsIn the context of budget preparation, the cash budget is a financial budget document that identifiesshort-term fluctuations in cash flowThe _____ is a financial budget and shows how a firm's operations, investing, and financing activities are expected to affect all of the asset, liability, and owners' equity accountsbudgeted balance sheetThe opportunity cost that arises when a firm uses owner-supplied resources is known as a(n) _____implicit costIn the context of managerial accounting, _____ are costs that change directly with the level of productionvariable costs____ are costs that are the result of a firm's general operations and are not tied to any specific cost objectIndirect costsAccounting EquationAssets = Liabilities + Owner's EquityClaims that a firm's owners have against their company's assetsOwner's equityClaims that outsiders have against a firm's assetsLiabilitiesResources owned by a firmAssetsincreases in assets that result from activities intended to earn incomeRevenueResources that are used up as a result of business operationsExpensesCompares account values reported on the financial statements over two or more years to identify changes and trendsHorizontal analysisInvolves payment of money or other resourcesOut-of-pocket costArises when a firm uses owner-supplied resourcesimplicit costRemains the same when the level of production changes within some relevant rangeFixed costVaries directly with the level of productionVariable costIncurred directly as a result of some specific cost objectDirect costResult of a firm's general operations and is not directly tied to any specific cost objectIndirect costTechnique to assign product costs based on links between activities that drive costs and the production of specific productsActivity-based costing