Accounting for Decision Makers
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| Reliable | Information that can be verified
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| Relevant | Information having to do with the matter at hand
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| Material | Information that is important enough to make a difference
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| Conservatism | Information related to recognizing losses as they occur
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| Order the steps in the decision cycle from first (1) to last (5). | Prepare financial statements
Analyze financial statements
Gather information
Make decision
Implement decision
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| Comprehensive income | The number used to reflect an overall measure of the change in a company’s wealth during the period
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| Net Income | A measure of a company's performance that is intended to summarize in one number the overall economic performance of a company in a given period is
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| Income from Continuing Operations | A measure of a company's performance that includes all items that are expected to continue into the future i
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| extraordinary items | Gains and losses that result from transactions that are both unusual in nature and infrequent in occurrence
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| Comprehensive income | reflects the overall change in a company’s wealth during a period and includes items that, in general, arise from changes in market conditions unrelated to the business operations of a company.
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| Revenue recognition | a cornerstone of accrual accounting together with matching principle. They both determine the accounting period, in which revenues and expenses are recognized.
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| Revenue recognition | A very good way to view ___________is that a company should report revenue in its income statement only after value has been delivered to its customers
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| Expanded Accounting Equation | Analysis of revenue and expense transactions requires the use of the
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| New Zealand | Thus far, the only national government to adopt the accrual basis for its official accounting system is ______
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| Statement of Cash Flows Categories are | Operating activities
Investing activities
Financing activities
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| Operating Activities | Cash Receipts: Sale of goods , services, trading securities, interest revenue, and dividend revenue. Cash Payments: inventory purchases, Wages, Taxes, Interest expense, other expenses
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| Investing Activites | Cash Receipts: Sale of planet assets, business segment, nontrading securities, collection of princip. on loads. Cash Payments: Purchase of plant assets, nontrading securities, making loans to other entities
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| Cash equivalents |
Short-term, highly liquid investments such as Treasury bills, commercial paper, and money market funds.
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| Which of the following is the typical sequencing of activities on the statement of cash flows? | Operating, investing, and financing
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| Financing Activities | Cash from: Issuances of stock, borrowing(mortgage, bonds, notes) Cash payments for: cash dividends, repayment of loads, repurchase of stock (treasury stock)
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| Significant noncash financing and investing transactions are | Reported in a narrative or in a separate schedule
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| indirect method | begins with net income as reported in the income statement and then details the adjustments needed to arrive at cash flow from operations
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| direct method | reporting the information contained in the last column of the adjustment worksheet
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| indirect method | 95% of large U.S. corporations use the________ when reporting cash from operating activities.
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| What is a cost that will change in the future based upon the decision made? | Differential cost
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| Opportunity Costs | The benefits lost or forfeited as a result of selecting one alternative course of action over another.
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| Out-of-pocket Costs | Costs that require an outlay of cash or other resources.
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| Pro Forma | A prediction of what the actual cash flow statement will look like in future years if the operating, investing, and financing plans are implemented.
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| Sunk Costs | Costs that are past costs and do not change as a result of a future decision.
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| Cost Behavior | The way a cost is affected by changes in activity levels.
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| Cost Drivers | Numerical measure used to reflect the amount of a specific cost that is associated with a particular activity.
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| Cost Pool | Total cost being generated by a specific overhead cost activity.
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| Differential Costs | Future costs that change as a result of a decision; also called incremental or relevant costs.
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| Direct Costs | Costs that are specifically traceable to a unit of business or segment being analyzed.
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| Period Costs | Costs not directly related to a product, service, or asset. They are charged as expenses to the income statement in the period in which they are incurred.
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| Product Costs | Costs associated with products or services offered.
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| Activity-based Costing (ABC) | A method of attributing overhead costs to products based on measurable factors that relate to activities that create overhead costs.
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| Unit-level Activities | Activities that take place each time a unit of product is produced.
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| Product-line Activities | Activities that take place in order to support a product line, regardless of the number of batches or individual units produced.
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| Facility Support Activities | Activities necessary to have a facility in order to participate in the development and production of products or services; activities are not related to any particular line of products or services.
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| Batch-level Activities | Activities that take place in order to support a batch or production run, regardless of the size of the batch.
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| C-V-P analysis, while useful for several purposes, is primarily useful in | Planning
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| C-V-P analysis is useful to managers in | Controlling decisions
Planning
Evaluating decisions
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| Mixed costs |
Costs that contain both variable and fixed costs components.
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| cost-volume-profit (C-V-P) analysis | Techniques for determining how changes in revenues, costs, and level of activity affect the profitability of an organization.
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