BA 101 TEST QUESTIONS AND ANSWERS LATEST UPDATE
Accounting
the recording, classifying, summarizing, and interpreting of financial events and
transactions in an organization to provide management and other interested parties the
financial information they need to make good decisions about its operations
Accounting Cycle
six step procedure that results in the preparation and analysis of the major financial
statements
Steps of the Accounting Cycle
1. analyze source documents 2. record transactions in journals 3. transfer journal
entires to ledger 4. take a trial balance 5. prepare financial statements 6. analyze
financial documents
Financial Statement
a summary of all the financial transactions that have occurred over a particular period;
indicates a firms financial health and stability, and are key factors in management
decisions
Assets = ____ + _____
liabilities (debts) + owners equity (what you own)
Assets
economic resources owned by a firm
Liabilities
businesses debts
Income Statements
financial statement that shows a firms bottom line - profits after costs, expenses, and
taxes
Revenue
monetary value of what a firm received for goods sold, services rendered, and other
payments
Cost of Goods Sold
measures costs of merchandise the firm sells or the costs of raw materials and supplies
it used in producing items for resale
Operating Expenses
Paid regardless - rent, salaries, supplies, etc
Statement of Cash Flows
reports cash receipts and cash disbursements related to the three major activities of a
firm
Cash Flow
difference between cash coming in and cash going out
Inventory turnover
costs of goods sold / average inventory
Financial Accounting
generates financial information and analyses for people primarily OUTSIDE the
organization
Managerial Accounting
, provides information and analysis to managers INSIDE the organization to assist them
in decision making
Auditing
reviewing and evaluating the information used to prepare a companys financial
statements
Return on Equity
indirect measure of risk that tells us how much a firm earned for each dollar invested by
its owners
Reasons a Firm Fails
undercapitalization, poor control over cash flow, inadequate expense control
Financial Managers
responsible for paying company's bills and collecting overdue payments to make sure
company doesn't lose money to bad debts
Financial Planning
analyzing short term and long term money flows to and from the firm; objective is to
optimize firms profitability and make best use of its money
Steps of Financial Planning
1. forecasting the firms short term and long term financial needs 2. developing budgets
to meet those needs 3. establishing financial controls to see whether the company is
achieving its goals
Short Term Forecast
predicts revenues, costs, and expenses for a period of one year or less
Budget
allocates the use of specific resources throughout the firm
Capital Expenditures
major investments in either tangible long term assets (land, buildings, equipment) or
intangible assets (patents, trademarks, copyright)
Debt Financing
funds raised through various forms of borrowing that must be repaid, legally
Trade Credit
practice of buying goods or services now and paying for them later
Secured Loan
backed by collateral, something valuable such as property
Factoring
process of selling accounts receivable for cash
Commercial Paper
consists of unsecured promissory notes, in amounts of $100,000 and up, that come due
in 270 days or less
Leverage
Raising funds through borrowing to increase the firms rate of return
Operating Funds
needed to manage day to day needs of a business as well as acquiring needed
inventory
Falling Dollar Value
amount of goods and services you can buy with a dollar in global market decreases
Rising Dollar Value
Accounting
the recording, classifying, summarizing, and interpreting of financial events and
transactions in an organization to provide management and other interested parties the
financial information they need to make good decisions about its operations
Accounting Cycle
six step procedure that results in the preparation and analysis of the major financial
statements
Steps of the Accounting Cycle
1. analyze source documents 2. record transactions in journals 3. transfer journal
entires to ledger 4. take a trial balance 5. prepare financial statements 6. analyze
financial documents
Financial Statement
a summary of all the financial transactions that have occurred over a particular period;
indicates a firms financial health and stability, and are key factors in management
decisions
Assets = ____ + _____
liabilities (debts) + owners equity (what you own)
Assets
economic resources owned by a firm
Liabilities
businesses debts
Income Statements
financial statement that shows a firms bottom line - profits after costs, expenses, and
taxes
Revenue
monetary value of what a firm received for goods sold, services rendered, and other
payments
Cost of Goods Sold
measures costs of merchandise the firm sells or the costs of raw materials and supplies
it used in producing items for resale
Operating Expenses
Paid regardless - rent, salaries, supplies, etc
Statement of Cash Flows
reports cash receipts and cash disbursements related to the three major activities of a
firm
Cash Flow
difference between cash coming in and cash going out
Inventory turnover
costs of goods sold / average inventory
Financial Accounting
generates financial information and analyses for people primarily OUTSIDE the
organization
Managerial Accounting
, provides information and analysis to managers INSIDE the organization to assist them
in decision making
Auditing
reviewing and evaluating the information used to prepare a companys financial
statements
Return on Equity
indirect measure of risk that tells us how much a firm earned for each dollar invested by
its owners
Reasons a Firm Fails
undercapitalization, poor control over cash flow, inadequate expense control
Financial Managers
responsible for paying company's bills and collecting overdue payments to make sure
company doesn't lose money to bad debts
Financial Planning
analyzing short term and long term money flows to and from the firm; objective is to
optimize firms profitability and make best use of its money
Steps of Financial Planning
1. forecasting the firms short term and long term financial needs 2. developing budgets
to meet those needs 3. establishing financial controls to see whether the company is
achieving its goals
Short Term Forecast
predicts revenues, costs, and expenses for a period of one year or less
Budget
allocates the use of specific resources throughout the firm
Capital Expenditures
major investments in either tangible long term assets (land, buildings, equipment) or
intangible assets (patents, trademarks, copyright)
Debt Financing
funds raised through various forms of borrowing that must be repaid, legally
Trade Credit
practice of buying goods or services now and paying for them later
Secured Loan
backed by collateral, something valuable such as property
Factoring
process of selling accounts receivable for cash
Commercial Paper
consists of unsecured promissory notes, in amounts of $100,000 and up, that come due
in 270 days or less
Leverage
Raising funds through borrowing to increase the firms rate of return
Operating Funds
needed to manage day to day needs of a business as well as acquiring needed
inventory
Falling Dollar Value
amount of goods and services you can buy with a dollar in global market decreases
Rising Dollar Value
