Bus 1010 chapter 14 Flashcards
Accounting
Comprehensive system for collecting, analyzing, and communicating financial information.
Bookeeping
Recording of accounting transactions.
Accounting Information System (AIS)
Organized procedure for identifying, measuring, recording, and retaining financial information for use in accounting statements and management reports.
Controller
Person who manages all of a firm’s accounting activities (chief accounting officer).
Financial Accounting
Field of accounting concerned with external users of a company’s financial information.
Managerial (management) accounting
field of accounting that serves internal users of a company’s financial information.
Certified Public Accountant (CPA)
accountant licensed by the state and offering services to the public.
Audit
systematic examination of a company’s accounting system to determine whether its financial reports reliably represent its operations.
Generally Accepted Accounting Principles (GAAP)
Accounting guidelines that govern the content and form of financial reports.
Tax Services
Assistance provided by CPAs for tax preparation and tax planning.
Management advisory services
assistance provided by CPA firms in areas such as financial planning, information systems design, and other areas of concern for client firms.
Core Competencies for Accounting
The combination of skills, technology, and knowledge that will be necessary for the future CPA.
Private Accountant
Salaried accountant hired by a business to carry out its day-to-day financial activities.
Management Accountant
Private accountant who provides financial services to support managers in various business activities within a firm.
Certified Management Accountant (CMA)
Professional designation awarded by the Institute of Management Accountants in recognition of management accounting qualifications.
Forensic Accounting
the practice of accounting for legal purposes.
Certified Fraud Examiner (CFE)
Professional designation administered by the Association of Certified Fraud Examiners in recognition of qualifications for a specialty area within forensic accounting.
Sarbanes-Oxley Act of 2002 (Sarbox or Sox)
Enactment of federal regulations to restore public trust in accounting practices by imposing new requirements on financial activities in publicly traded corporations.
Accounting Equation
Assets=Liabilities + Owner’s Equity; used by accountants to balance data for the firm’s financial transactions at various points in the year.
Asset
Any economic resource expected to benefit a firm or an individual who owns it.
Liability
Debt owed by a firm to an outside organization or individual.
Owners’ Equity
Amount of money that owners would receive if they sold all of a firm’s assets and paid all of its liabilities.
Financial Statement
any of several types of reports summarizing a company’s financial status to stakeholders and to aid in managerial decision making.
Balance Sheet
Financial statement that supplies detailed information about a firm’s assets, liabilities, and owners’ equity.
Current Asset
Asset that can or will be converted into cash within a year.
Liquidity
Ease with which an asset can be converted into cash.
Fixed Asset
Asset with long-term use or value, such as land, buildings, and equipment.
Depreciation
Accounting method for distributing the cost of an asset over its useful life.
Intangible Asset
Nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit.
Goodwill
Amount paid for an existing business above the value of its other assets.
Current Liability
Debt that must be paid within one year.
Accounts Payable (Payables)
Current liabilities consisting of bills owed to suppliers, plus wages and taxes due within the coming year.
Long-term Liability
Debt that is not due for at least one year.
Paid-In Capital
Money that is invested in a company by its owners.
Retained Earnings
Earnings retained by a firm for its use rather than paid out as dividends.
Income Statement (Profit-and-Loss Statement)
Financial statement listing a firm’s annual revenues and expenses so that a bottom line shows annual profit or loss.
Revenues
Funds that flow into a business from the sale of good or services.
Cost of Revenues
Costs that a company incurs to obtain revenues from other companies.
Cost of Goods Sold
Costs of obtaining materials for making the products sold by a firm during the year.
Gross Profit
Preliminary, quick-to-calculate profit figure calculated from the firm’s revenues minus its cost of revenues (the direct costs of getting the revenues).
Operating Expenses
Costs, other than the cost of revenues, incurred in producing a good or service.
Operating Income
Gross profit minus operating expenses.
Net Income (Net Profit, Net Earnings)
Gross profit minus operating expenses and income taxes.
Statement of Cash Flows
Financial statement describing a firm’s yearly cash receipts an cash payments.
Budget
Detailed statement of estimated receipts and expenditures for a future period of time.
Revenue Recognition
Formal recording and reporting of revenues at the appropriate time.
Full Disclosure
Guideline that financial statements should not include just numbers but should also furnish management’s interpretations and explanations of those numbers.
Solvency Ratio
Financial ratio, either short-or long-term, for estimating the borrower’s ability to repay debt.
Profitability Ratio
Financial ratio for measuring a firm’s potential earnings.
Activity Ratio
Financial ratio for evaluating management’s efficiency in using a firm’s assets.
Short-term Solvency Ratio
Financial ratio for measuring a company’s ability to pay immediate debts.
Current Ratio
Financial ratio for measuring a company’s ability to pay current debts out of current assets.
Debt
Company’s total liabilities.
Leverage
Ability to finance an investment through borrowed funds.
Earnings per Share
Profitability ratio measuring the net profit that the company earns for each share of outstanding stock.
Code of Profesional Conduct
Code of ethics for CPAs as maintained and enforced by the AICPA.
International Accounting Standards Board (IASB)
Organization responsible for developing a set of global accounting standards and for gaining implementation of those standards.
