Chapter 12 (Accounting) Flashcards
Accounting
a system for measuring and summarizing business activities, interpreting financial information, and communicating the results to management and other stakeholders to help them make better business decisions
Management Accounting
provides information and analysis to decision makers inside the organization (such as owners and managers) to help them operate the business
Financial Accounting
provides information not only to internal managers, but also to people outside the organization (such as investors, creditors, government agencies, suppliers, employees, and labor unions) to assist them in assessing a firm’s financial performance
GAAP
uniform set of rules called generally accepted accounting principles which are issued by an independent agency called the Financial Accounting Standards Board (FASB)
International Financial Reporting Standards (IFRS)
accounting standards issued by the International Accounting Standards Board (IASB)
Income Statement
shows a firm’s revenues and expenses and whether it made a profit
Balance Sheet
shows a firm’s assets, liabilities and owner’s equity (the amount that its owners have invested in it)
Accounting Equation
assets = liabilities + owner’s equity
Statement of Owner’s Equity
reports the changes in owner’s equity that have occurred over a specified period of time
Break-even Analysis
a technique used to determine the level of sales needed to break even—to operate at a sales level at which you have neither profit nor loss
Inventory
An item manufactured for later sale or bought for resale
Gross Profit
REV-COGS
Gross Profit Margin
(REV-COGS)/REV
Operating Profit
REV-COGS-Op Exp
Operating Profit Margin
(REV-COGS-Op Exp)/REV
