Chapter 1-2 Flashcards
Accountant
Accountants make business decisions, prepares, and interprets financial reports. Higher level position.
Profit vs. Not for Profit
For profit businesses work to make money for the owners while not for profit businesses works to protect and preserve the environment by balancing their income with their expenses. Often times not for profits are designed to do some sort of good like charity.
Accounting Clerk
An entry level position that often performs one or two accounting tasks. One or two departments and day to day work.
CPA
Certified public accountant. Must past a national test(CPA exam) and meet experience and education requirements. Masters degree. 3 years working in public accounting.
Public Accounting
Provide accounting services to their clients
Big Four
4 major public accounting firms, PricewaterhouseCoopers, Deloitte and Touche, Ernst and Young, and KPMG
Free Enterprise
People are free to produce the goods and services they choose. Capitalism.
Profit
The amount of money earned over the money spent to keep the business going
Loss
Spent money more then they earn
Entreprenuer
People who transform ideas for products or services into real-world businesses
Capital
Money supplied by investors, banks, or owners of a business
Service
Provides a needed service for a fee
Merchandising
Buys finished products and resells them to individuals or businesses
Manufactoring
Buys raw materials and transforms them into finished products through the use of labor and capital then sells them to individuals or other businesses
Sole Proprietorship
A business owned by one person
Partnership
A business owned by two or more people called partners, who agree to operate the business as co-owners
Corporation
A business organization that is recognized by law tohave a life of its own. Must get permission from the state to operate.
Charter
Legal permission by the state to operate a corporation. Gives a corporation certain rights and privileges.
Shareholder
Legal owners of a corporation. Also called stock-holders.
Manual vs. Computerized Accounting
Manual is accounting information processed by hand. Computer is financial information being recorded by computer
GAAP
Generally accepted accounting principles. A set or rules all accountants use to prepare their reports
Financial Reports
Summarized information about the financial status of a business. 2 most widely used financial statements are the balance sheet and the income statement.
Financial Accounting
Focuses on reporting information to external users.(Scorekeeping). Creates information for external users. External users are banks, government, unions, investors
Managerial Accounting(Cost Accounting)
Focuses on reporting information the management referred to as accounting for internal users. Managers use info for purchasing, hiring, production, sales
Business Entity
Exists independently of its owners personal assets in terms of accounting. Accounting Assumption.
Accounting Period
A period of time covered by an accounting report. Monthly, quarterly, yearly. Accounting Assumption.
Going Concern
Accountants assume that a business has the ability to survive and operate indefinitely. A business is expected to continue as a going concern.. Accounting Assumption.
