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A snapshot of the summary - Financial & Managerial Accounting
1 Accounting Information for Decision Making
Name five ways accounting information might be used by managers or employees.
1. Establishing accountability
2. Tracking routine activities and balances
3. Looking at details of a particular transaction
4. Evaluating efficiency and performance
5. Documenting the business for needs such as taxes
What is a ledger?
Ledgers track specific accounts, such as Cash or Sales Revenue. All entries in journals must be posted to the ledger at given intervals.
Which type of account increases with a debit, and which types increase with a credit?Assets increase with a debit, while liabilities and equity increase with a credit.
What is a journal?A chronological account of transactions. They may be all of some type (like sales) or in the General Journal as unique events.
2 Basic Financial Statements
Which accounting principle requires owners to keep personal and business expenses separated?The entity principle
Which principle generally prohibits a company from raising the value of an asset above its historic cost?The cost principle
Which principle requires accounting based on facts and not subjective ideas?The objectivity principle
What are the two ways owner's equity can decrease? What are two ways it can increase?Payments/transfers to owners, or losses
Investments from owners, or earnings
In the Statement of Cash Flows, define (1) operating activities, (2) investing activities and (3) financing activities.(1) The cash effects of income statement events
(2) The cash effects of buying and selling major assets
(3) The cash effects of investment by/disbursements to owners, and borrowing or paying back loans
3 The Accounting Cycle
What is the accounting cycle?A sequence of procedures to record, classify and summarize accounting information in financial reports