Chapter 1 Flashcards
Financial Accounting
is information for EXTERNAL decision makers
Managerial Accounting
provides information to internal decision makers
Financial Accounting Standard Board (FASB)
oversees creation and governance of accounting standards
securities and exchange commision (sec)
oversess the US financial markets
Useful accounting information must be:
- relevant
- faithfully representative-when its complete, neutral, free from error
Accounting guidelines are called
Generally Accepted Accounting Principles
economic entity assumption
an organization that stands apart as a separate economic unti
features of a copoation
- separate legal entity
- continuous life and transfer-ability of ownership
- limited liability of stockholders
- separation of ownership and management
Cost principle
acquired assets and services should be recorded at their actual costs
going concern assumption
assumes that the entity will remain in operation for the foreseeable future
monetary unit assumption
requires the items on the financial statements to be measured in terms of a monetary unit
sarbanes-oxley act (SOX)
requires companies to review internal controls
asset
is an economic resource that is expected to benefit the business in the future
liabilities
are debts that are owed to creditors
equity
the owners’ claims to the assets of the business
transaction
is any event that affects the financial position of the business and can be measured with faithful representation
income statement
provides information about profitability for a particular period for the company
statement of retained earnings
informs users abut how much of the earnings were kept and reinvested for the company
balance sheet
provided valuable information to financial statement users about economic resources the company has (assets) as well as debts the company owes(liabilities). Allows decision makers to determine their opinion about the financial position of the company.
statement of cash flows
reports on a business’ cash receipts and cash payments for a period of time
