Accounting Intro-OX Flashcards
Accounting is
Accounting is the process of organizing, analyzing, and communicating financial information that is used for decision-making.
Explain the Importance of Accounting and Distinguish between Financial and Managerial Accounting
Financial accounting measures the financial performance of an organization using standard conventions to prepare and distribute financial reports, while managerial accounting uses both financial and non-financial information as a basis for making decisions within an organization.
Accounting information plays a vital role in personal and professional decisions, and a solid understanding of accounting can be useful in many professions.
Identify Users of Accounting Information and How They Apply Information
Accounting information is used by both internal and external users, with internal users being those within an organization who use financial information to make day-to-day decisions, while external users are those outside of the organization who use the financial information to make decisions or to evaluate an entity’s performance. Financial accounting is one of the broad categories in the study of accounting, and accountants generally use the same methodologies to prepare financial information. Financial information is mostly historical in nature, although companies and other entities also incorporate estimates into their accounting processes. The page also discusses the differences between financial and managerial accounting[1].
discusses the similarities and differences between for-profit, governmental, and not-for-profit organizations.
All of these organizations have inflows and outflows of cash and other resources that must be managed, and all have a need for accounting information. For-profit businesses seek to earn a profit by selling goods and services, while governmental entities provide services to the general public and are funded through taxes and fees.
Service businesses provide intangible benefits to customers, while not-for-profit organizations are formed for a specific purpose or mission and want to use available resources in an efficient manner[1].
1.4 Explain Why Accounting Is Important to Business Stakeholders
why accounting is important to business stakeholders. It defines stakeholders as people or groups who rely on financial information to make decisions, such as stockholders, creditors, governmental and regulatory agencies, customers, management and other employees, and various other parties and entities. The article discusses how stockholders use financial information to assess the financial performance of a business and make decisions such as whether or not to purchase additional stock, sell existing stock, or maintain the current level of stock ownership. It also explains how creditors and lenders use financial information to assess the likelihood that funds will be repaid, which helps them determine how much money to lend, how long to lend the money for, and how much interest to charge the borrower. Finally, the article notes that businesses generally have three ways to raise capital: profitable operations, selling ownership (stock), and borrowing from lenders[1].
Accounting is sometimes called the “language of _____.”
Wall Street
business
Main Street
financial statements
Financial accounting information ________.
should be incomplete in order to confuse competitors
should be prepared differently by each company
provides investors guarantees about the future
summarizes what has already occurred
External users of financial accounting information include all of the following except ________.
lenders such as bankers
governmental agencies such as the IRS
employees of a business
potential investors
Which of the following groups would have access to managerial accounting information?
bankers
investors
competitors of the business
managers
Financial accounting information ________.
should be incomplete in order to confuse competitors
should be prepared differently by each company
provides investors guarantees about the future
summarizes what has already occurred
All of the following are examples of managerial accounting activities except ________.
preparing external financial statements in compliance with GAAP
deciding whether or not to use automation
making equipment repair or replacement decisions
measuring costs of production for each product produced
External users of financial accounting information include all of the following except ________.
lenders such as bankers
governmental agencies such as the IRS
employees of a business
potential investors
Which of the following groups would have access to managerial accounting information?
bankers
investors
competitors of the business
managers
All of the following are examples of managerial accounting activities except ________.
preparing external financial statements in compliance with GAAP
deciding whether or not to use automation
making equipment repair or replacement decisions
measuring costs of production for each product produced
Which of the following is not true?
Organizations share a common purpose or mission.
Organizations have inflows and outflows of resources.
Organizations add value to society.
Organizations need accounting information.
