ACC 100 Chapter Notes - Chapter 2: Flowchart, Retained Earnings, Financial Statement

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graytiger892

18 Sep 2016

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Chapter 2 the accounting equation and transaction. Financial information is important in order for multiple parties to make decision. I. e. a business needing it to get a loan and a bank needing it to decide the amount of loan that is appropriate. Financial data is not the same as financial information. Information is the end product of data processing. Once data has been categorized, analyzed, and formatted for presentation purposes, it becomes information which is useful for decision making. The process of changing financial data into financial information is carried out by the accounting system. It"s an information system that collects, groups, and communicates a business"s financial position, including its financial health and profitability. The end result of a business"s accounting system is financial information in the form of financial statements. They tell a business"s story, what it does and how well it does it. Also provides the business"s financial performance, it"s current financial position and cash flows.

Related Questions

Question 1

Identify the item below that is not one of the four different types of data processing activities.

		deleting
		reading
		creating
		using

Question 2

All of the following are advantages of an ERP system except

		ERPs permit manufacturing plants to receive new orders in real time.
		in an ERP, data input is captured or keyed once.
		it takes considerable experience and training to use an ERP system effectively.
		ERPs permit management to gain greater visibility into every area of the enterprise.

Question 3

Sam Jones has been the controller of Downtown Tires for 25 years. Ownership of the firm recently changed hands and the new owners are conducting an audit of the financial records. The audit has been unable to reproduce financial reports that were prepared by Sam. While there is no evidence of wrongdoing, the auditors are concerned that the discrepancies might contribute to poor decisions. Which of the following characteristics of useful information is absent in the situation described above?

		relevant
		reliable
		complete
		timely
		understandable
		verifiable
		accessible

Question 4

An ERP system might facilitate the purchase of direct materials by all of the following except

		preparing a purchase order when inventory falls to reorder point.
		routing a purchase order to a purchasing agent for approval.
		communicating a purchase order to a supplier.
		selecting the best supplier by comparing bids.

Question 5

Antia Carmie is the largest collector and retailer of Japanese fans in the St. Louis area. Antia uses computer technology to provide superior customer service. The store's database system was designed to make detailed information about each Japanese fan easily accessible to her customers. Accordingly, the fan price and condition are provided for each fan, along with many pictures of each fan. In Antia's database, the price of the Japanese fans is a(n)

		entity.
		attribute.
		field.
		record.

Question 6

Which of the following is not considered a source document?

		A copy of the company's shipping document.
		A copy of the company's ledger.
		A copy of the company's sales journal.
		A copy of the company's financial statements.

Question 7

In an ERP system, the module used to record data about transactions in the disbursement cycle is called

		financial.
		order to cash.
		customer relationship management.
		purchase to pay.

Question 8

Baggins Incorporated identifies new product development and product improvement as the top corporate goals. An employee developed an innovation that will correct a shortcoming in one of the company's products. Although Baggins current Return on Investment (ROI) is 12%, the product innovation is expected to generate ROI of only 10%. As a result, awarding bonuses to employees based on ROI resulted in

		goal conflict.
		information overload.
		decreased value of information.
		goal congruence.

Question 9

________ are examples of activities that constitute inbound logistics.

		Activities that transform inputs into final products or services
		Activities that provide post-sale support to customers
		Activities that consist of receiving, storing, and distributing the materials used as inputs by the organization to create goods and/or services it sells
		Activities that help customers to buy the organization's products or services

Question 10

In which transaction cycle would information for inventory purchases be most likely to pass between internal and external accounting information systems?

		the revenue cycle
		the expenditure cycle
		the human resources / payroll cycle
		the financing cycle

Question 11

The collection of customer payment is part of which transaction cycle?

		the human resources cycle
		the production cycle
		the revenue cycle
		the expenditure cycle

Question 12

Which of the following is an example of source data automation?

		POS (point-of-sale) scanners in retail stores
		a bill of lading
		a subsidiary ledger
		a utility bill

Question 13

All of the following are guidelines for developing a good coding system except

		be as sophisticated as possible to promote usage.
		be consistent with its intended use.
		be flexible to allow for growth.
		be consistent with the company's organization structure.

Question 14

What is a key decision that needs to be made with regards to borrowing money from lenders?

		the location
		pro forma income statement
		how much capital to acquire
		job descriptions

Question 15

Identify the false statement below.

		A service company does not have an inventory system.
		Retail stores do not have a production cycle.
		Financial institutions have installment-loan cycles.
		Every organization should implement every transaction cycle module.

Question 16

The chart of accounts of a fast-food restaurant would probably include

		a list of customers.
		a list of financial statement accounts.
		a list of vendors.
		a list of employees.

Question 17

Which statement below regarding the AIS is false?

		Traditionally, most AIS have been designed so that both financial and operational data are stored in a manner that facilitates their integration in reports.
		The AIS must be able to provide managers with detailed and operational information about the organization's performance.
		Both traditional financial measures and operational data are required for proper and complete evaluation of performance.
		The AIS was often just one of the information systems used by an organization to collect and process financial and nonfinancial data.

Question 18

In Petaluma, California, electric power is provided to consumers by Pacific Power. Each month Pacific Power mails bills to 186,000 households and then processes payments as they are received. What is the best way for this business to ensure that payment data entry is efficient and accurate?

		well-designed paper forms
		turnaround documents
		source data automation
		sequentially numbered bills

Question 19

Data must be converted into information to be considered useful and meaningful for decision making. There are seven characteristics that make information both useful and meaningful. If the same information can be reproduced by two independent and knowledgeable people, it is representative of the characteristic of

		verifiability.
		truthful.
		relevance.
		reliability.

Question 20

		entity.
		attribute.
		field.
		record.

lilaccod491

Lewis Securities Inc. has decided to acquire a new market dataand quotation system for its Richmond home office. The systemreceives current market prices and other information from severalonline data services and then either displays the information on ascreen or stores it for later retrieval by the firmâs brokers. Thesystem also permits customers to call up current quotes onterminals in the lobby. The equipment costs $1,000,000 and, if itwere purchased, Lewis could obtain a term loan for the fullpurchase price at a 10% interest rate. Although the equipment has a6-year useful life, it is classified as a special-purpose computerand therefore falls into the MACRS 3-year class. If the system werepurchased, a 4-year maintenance contract could be obtained at acost of $20,000 per year, payable at the beginning of each year.The equipment would be sold after 4 years, and the best estimate ofits residual value is $200,000. However, because real-time displaysystem technol- ogy is changing rapidly, the actual residual valueis uncertain. As an alternative to the borrow-and-buy plan, theequipment manufacturer informed Lewis that Con- solidated Leasingwould be willing to write a 4-year guideline lease on theequipment, including mainte- nance, for payments of $260,000 at thebeginning of each year. Lewisâ marginal federal-plus-state tax rateis 40%. You have been asked to analyze the lease- versus-purchasedecision and, in the process, to answer the following questions: a.(1) Who are the two parties to a lease transaction? (2) What arethe five primary types of leases, and what are theircharacteristics? (3) How are leases classified for tax purposes?(4) What effect does leasing have on a firmâs balance sheet? (5)What effect does leasing have on a firmâs capital structure? b. (1)What is the present value cost of owning the equipment? (Hint: Setup a time line that shows the net cash flows over the period t 5 0to t 5 4, and then find the PV of these net cash flows, or the PVcost of owning.) (2) Explain the rationale for the discount rateyou used to find the PV. c. What is Lewisâ present value cost ofleasing the equipment? (Hint: Again, construct a time line.) d.What is the net advantage to leasing (NAL)? Does your analysisindicate that Lewis should buy or lease the equipment? Explain. e.Now assume that the equipmentâs residual value could be as low as$0 or as high as $400,000 but $200,000 is the expected value.Because the residual value is riskier than the other relevant cashflows, this differential risk should be incor- porated into theanalysis. Describe how this could be accomplished. (No calculationsare necessary, but explain how you would modify the analysis ifcalculations were required.) What effect would the residual valueâsincreased uncertainty have on Lewisâ lease-versus-purchasedecision? f. The lessee compares the cost of owning the equipmentwith the cost of leasing it. Now put yourself in the lessorâsshoes. In a few sentences, how should you analyze the decision towrite or not to write the lease? g. (1) Assume that the leasepayments were actually $280,000 per year, that Consolidated Leasingis also in the 40% tax bracket, and that it also forecasts a$200,000 residual value. Also, to furnish the maintenance support,Consoli- dated would have to purchase a maintenance contract fromthe manufacturer at the same $20,000 annual cost, again paid inadvance. Consolidated Leasing can obtain an expected 10% pre-taxreturn on investments of similar risk. What would be ConsolidatedâsNPV and IRR of leasing under these conditions? (2) What do youthink the lessorâs NPV would be if the lease payment were set at$260,000 per year? (Hint: The lessorâs cash flows would be aâmirror imageâ of the lesseeâs cash flows.) h. Lewisâ managementhas been considering moving to a new downtown location, and theyare con- cerned that these plans may come to fruition prior to theequipment leaseâs expiration. If the move occurs, then Lewis wouldbuy or lease an entirely new set of equipment, so management wouldlike to include a cancellation clause in the lease contract. Whateffect would such a clause have on the riskiness of the lease fromLewisâ standpoint? From the lessorâs standpoint? If you were theles- sor, would you insist on changing any of the other lease termsif a cancellation clause were added? Should the cancellation clausecontain provi- sions similar to call premiums or any restrictivecovenants and/or penalties of the type contained in bondindentures? Explain your answer.

ACC 100 Chapter Notes - Chapter 2: Flowchart, Retained Earnings, Financial Statement

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