Accounting Key Terms Flashcards
Accounting
the process of collecting, recording, classifying, summarizing, reporting, and analyzing financial activities
Financial Accounting
accounting that focuses on preparing external financial reports that are used b outsiders such as lenders, suppliers, investors, and government agencies to assess the financial strength of a business
Managerial Accounting
accounting that provides financial information that managers inside the organization can use to evaluate and make decisions about current and future operations
Auditing
the process of reviewing the records used to prepare financial statements and issuing a formal auditors opinion indicating whether the statement have been prepared in accordance with accepted accounting rules
Certified Public Accounting (CPA)
an accountant who has completed an approved bachelors degree program passed a test prepared by the American institute of CPA’s, only a CPA can issue an auditors opinion on a firms financial statement
Balance Sheet
a financial statement that summarizes a firms financial position at a specific point in time
Assets
things of value owned by a firm
Liabilities
what a firm owes to its creditors, aka debts
Owners Equity
the total amount of investment in the firm minus any liabilities also called net worth. Includes owners investments (stock issued for a public company), net income, minus dividends
Accounting Equation
Assets= liabilities +owners equity
Income Statement
a financial statement that summarizes a firms revenues and expenses and shows its total profit or loss over a period of time
Revenues
the dollar amount of a firms sales plus any other income it received from sources such as interest, dividends, and rents
Expenses
the costs of generating revenues
Cost of goods sold
the total expenses of buying or producing a firms goods or services
Gross Profit
amount a company earns after paying to produce or buy its products before subtracting operating expenses
