Chapter 1: Accounting and the Business Environment Flashcards
the information system that measures business activities, processes the information into reports, and communicates the results to decision makers.
Accounting
Name the 2 major fields of accounting
Financial Accounting & Managerial Accounting
The field of accounting that focuses on providing information for external decision makers
Financial Accounting
Focuses on information for internal decision makers, such as the company’s managers and employees
Managerial Accounting
IFRS stands for:
International Financial Reporting Standards
Any person or business to whom a business owes money
Creditor
CPA stands for
Certified Public Accountants
Licensed professional accountants who serve the general public
CPA(Certified Public Accountants)
CMA stands for:
Certified Management Accountants
certified professional who specialize in accounting and financial management knowledge. They typically work for a single company
CMA (Certified Management Accountants)
Certified accountants general make how much more than their non-certified colleagues?
10 - 15%
FASB stands for:
Financial Accounting Standards Board
Privately funded organization, who oversees the creation and governance of accounting standards
FASB (Financial Accounting Standards Board)
The FASB works with which governmental regulatory agency
Securities and Exchange Commission (SEC)
US government agency that oversees the US financial markets
Securities and Exchange Commission (SEC)
Accounting guidelines, currently formulated by the Financial Accounting Standards Board, the main U.S. accounting rule book
Generally Accepted Accounting Principles (GAAP)
An organization that stands apart as a separate economic unit
Economic Entity Assumption
A business can be organized as a:
Sole Proprietorship, Partnership, Corporation, or Limited Liability Company (LLC)
A business with a single owner
Sole Proprietorship
A business with two or more owners and not organized as a corporation
Partnership
A business organized under state law that is a separate legal entity
Corporation
A company in which each member is only liable for his or her own actions
Limited Liability Company
A principle that states that acquired assets and services should be recorded at their actual cost
Cost Principle (Historical cost)
Assumes that the entity will remain in operation for the foreseeable future
Going Concern Assumption
Rise in the price level
Inflation
The assumption that requires the items on the financial statements to be measured in terms of a monetary unit
Monetary Unit Assumption
IFRS stands for:
International Financial Reporting Standards
A set of global accounting guidelines, formulated by the International Accounting Standards Board (IASB)
International Financial Reporting Standards (IFRS)
The IFRS is a set of global accounting standards that are used/required in how many nations?
120 nations
IASB stands for:
International Accounting Standards Board
The current timeline shows that reporting under IFRS could start as early as:
2015 or 2016
an examination of a company’s financial statements and records
Audit
Requires companies to review interna control and take responsibility for the accuracy and completeness of their financial reports
Sarbanes-Oxley Act (SOX)
The Sarbanes-Oxley At created which new watchdog agency to monitor the work of independent accountants who audit public companies?
Public Company Accounting Oversight Board (PCAOB)
The basic tool of accounting, measuring the resources of the business (what the business owns or has control of) and the claims to those resources (what the business owes to creditors and to the owner). Assets=Liabilities + Equity
Accounting Equation
What is the accounting equation?
Assets=Liabilities + Equity
Economic resources that are expected to benefit the business in the future. Something the business owns or has control of
Assets
Example of an asset:
Cash, land, merchandise, furniture, inventory, etc.
Debts that are owed to creditors
Liabilities
The owner’s claim to the assets of the business
Equity
Owner contributions to a business
Owner’s Capital
Amounts earned from delivering goods or services to customers
Revenues
The cost of selling goods or services
Expenses
Payments of equity to the owner
Owner’s Withdrawals
The result of operations that occurs when total revenues are greater than total expenses
Net Income
The result of operations that occurs when total expenses are greater than total revenues
Net Loss
An event that affects the financial position of the business and can be measured reliably in dollar amounts
Transaction
A short-term liability that will be paid in the future
Accounts Payable
The right to receive cash in the future from customers for goods sold or for services performed
Accounts Receivable
Business documents that are used to communicate information needed to make business decisions
Financial Statements
Reports the net income or net loss of the business for a specific period
Income Statement
Shows the changes in the owner’s capital account for a specific period
Statement of Owner’s Equity
Reports on the assets, liabilities, and owner’s equity of the business as of a specific date
Balance Sheet
Reports on a business’s cash receipts and cash payments for a specific period
Answers the question of whether the business generates enough cash to pay its bills
Statement of Cash Flows
Presents a summary of business entity’s revenues and expenses for a period of time (month, quarter, year)
Statement of Earnings
Which two types of accounts are reported on the income statement?
Revenues and Expenses
Shows the changes in capital for a business entity during a time period (month, quarter, year)
Owner’s Equity Statement
Lists a business entity’s assets, liabilities, and owers equity as of a specific date, usually the end of a month, quarter, or yar
Balance Sheet (Statement of financial positions)
Reports the cash coming in (positive amounts) and the cash going out (negative amounts) during a period
Statement of Cash Flow
Which 3 sections is the cash flows divides into?
Operating, Investing, and Financing
Involve cash receipts for services provided and cash payments for expenses paid
Operating Activities
the purchase and sale of land and equipment for cash
Investing Activities
Cash contributions by the owner and withdrawals of cash by the owner
Financing Activities
