Chapter 1: Accounting Information For Decision Making Flashcards
Primary objective of accounting
Provide information that is useful in making good decisions, so prosperity and welfare is maximized.
Financial Accounting
General-purpose accounting information
Assists external users such as investors and creditors in the decision-making process.
Management accounting
ONLY to assist management in operating the business
Tax Accounting
Information that must conform with income tax reporting requirements.
Since accounting counts as an Information System, its basic functions can be
- Interpret and record the effects of business transactions
- Classify the effects of similar transactions to be used in reports
- Summarize and communicate the information to decision makers
Primary Financial Statements:
- Balance Sheet
- Income Statement
- Statement of Cash Flows
Balance Sheet
Shows where the company stands in financial terms on A SPECIFIC DATE; it is also called the statement of Financial position.
Income Statement
Shows the details of a company’s profit related activities OVER A PERIOD OF TIME.
Statement of Cash flows
Shows the details of a company’s activities involving cash during a PERIOD OF TIME.
SEC (Securities and Exchange Commission)
Governmental agency that establishes accounting principles and financial reporting requirements for publicly owned corporations.
FASB (Financial Accounting Standards Board)
Is an independent rule-making body that maintains the accounting standards codification. The most authoritative source of Generally Accepted Accounting Principles (GAAP).
International Accounting Standards Board (IASB)
Based in London, that issues international Financial Reporting Standards.
Audits
Examination of a company’s financial statement, to determine the fairness of the statement.
PCAOB (Public Company Accounting Oversight Board)
Inspects the quality of audits, Charged with oversight of the public accounting profession.
CPA
Certified public accountant
