Fundamental Accounting Principles

Day's Inventory on Hand – The average number of days it takes a company to sell the inventory it has in stock.
Days Inven.= # of days in a year/Inven. TO
Accounting Cyclye – the series of accounting activities included in recording financial information for a fiscal period
Integrity – Adherence to moral and ethical principles; soundness of moral character; honesty
13. Which of the following is the best response to this pricing model: "It's OK to sell products for less than what you paid for them because that will bring you more customers."
1. Agree – the higher contribution margin from more customers will eventually allow the company to break even and then earn a profit
2. Disagree – It will take too long to break even under this model
3. Agree – it would allow the company to recover some of its fixed costs, even if the company is not profitable
4. Disagree – the more the company sells, the bigger its loss will be – 4. Disagree – the more the company sells, the bigger its loss will be
Conservatism – When faced with tow relatively equal ways to report an even, a company should choose the accounting method that will be LEAST LIKELY to overstate the assets of the profit
IAS 7 Cash Flow Statements – * Requires a cash flow statement is included in the FS
* Compliments IS & BS – IS reports on financial performance, BS reports on financial position, CFS focuses on the changes in financial position
* OPERATING ACTIVITIES – main revenue-producting activities, interest & tax
* INVESTING ACTIVITIES – acquisition/disposal of NCA & other investments
* FINANCING ACTIVITIES – issue of new shares, payments to repay shares, changes in LT borrowing, dividends
Operating cash flows/ Net Sales – Cash Flow to sales
Return on assets – Assesses the effectiveness of asset utilisation the higher the ratio the more assets are funded by debt.
What is the present value of $100 paid in 5 years if the interest rate is 5 percent?
Independent internal verification – Periodic, surprise reviews of all job functions. Done by someone unrelated in any way to people responsible for tasks being checked. This type of work is often done by an accounting professional known as an internal auditor
chef – a head cook in a hotel, restaurant, etc.
BUSINESS PROCESS – A SERIES OF STEPS THAT ARE FOLLOWED IN ORDER TO CARRY OUT A TASK IN BUSINESS
Current Assets – Cash
Accounts receivable
Inventory
Marketable securities
Prepaid expenses
Whаt is the present vаlue оf $100 pаid in 5 years if the interest rate is 5 percent?
accounts receivable turnover – measures how many times per year receivables are collected.
-net credit sales divided by Average Accounts receivable
-average receivable (Beginning Accounts Receivable minus (-) ending accounts receivable) divided by 2

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