accounting and the business environment Flashcards
financial accounting
managerial accounting
audit
preparation of financial statements for decisions makers
provides managers with the essential info they can use to run organizations
independent accounts who decide whether or not the financial statements reflect right
accounting: info system that (3)
measures business financial activities
process info into reports
communicates the results to decision-makers
internal vs external users
businesses and not-for-profits vs individuals, contributors, investors, shareholders and creditors
objective of financial reporting
communicate info that is useful to investors, creditors and other users in making investment decisions and assessing the success of a company
qualitative characteristics of accounting info (4
)
understandability
relevance
reliability
comparability
assumptions (4)
economic entity
going concern
stable money unit
time-period
principles (2)
recognition criteria (matching principle)
measurement (cost principle)
constraints (2)
cost-benefit (benefits > costs)
materiality (amount that may be ignored)
accounting equation
assets = liabilities + owner’s equity
business transaction
event that affects the financial position of the business entity
income statement
revenues and expenses
net income or loss
statement of owner’s equity
changes in owner’s equity
capital + investments - withdrawals + net income/loss
statement of cash flows
operating, investing and financing
balance sheet
assets = liabilities + capital
headings
the legal name of the business
name of statement
date (balance sheet) or for the time period (income statement and owner’s equity)
