Chapter 14 Flashcards
what does accounting allow?
allows to report financial information about nonprofit organizations like churches, schools, hospitals, fraternities, and gov agencies
what is accounting?
the recording, classifying, summarizing and interpreting of financial events and transactions in an organization to provide good management to make good decisions about operations
what are the 6 steps to the accounting cycle?
- analyze (source docs like sales slips or travel records)
- record transactions in journals
- transfer/post journal entries to ledger
- take a trial balance
- prepare financial statements
- analyze financial statements
who doe the accounting cycle rely on?
bookkeepers and an accountant
how is an accountant different than a bookkeeper
Bookkeepers handle the day-to-day tasks of recording financial transactions, while accountants provide insight and analysis of that data and generate accounting reports.
whats a ledger?
An accounting ledger is an account or record used to store bookkeeping entries for balance-sheet and income-statement transactions. Accounting ledger journal entries can include accounts like cash, accounts receivable, investments, inventory, accounts payable, accrued expenses, and customer deposits.
whats a financial statement
a summary of all the financial transactions that have occured over a particular time, they indicate current health and stability
what are the key financial statements of a business
- the balance sheet (reports financial condition on a specific date)
- the income statement (summarizes revenues, cogs, and expenses for a specific time period)
- the statement of cash flows (provides summary of money coming into and out of the firm)
whats the fundamental accounting equation
assets=liabilities + owners’ equity
what are assets
economic resources (things of value) owned by a firm
what does liquidity mean
the ease with which an asset can be converted to cash
what are current assets
items that can or will be converted into cash within 1 year. They include cash, accounts receivable and inventory
what are fixed assets
long term assets that relatively permanent like land or buildings
what are intangible assets
long term assets that have no physical form but do have value like patents, trademarks, copyrights and goodwills
what are liabilities
what a business owes to others (debts)
what are current liabilities
debts due in one year or less
what are long term liabilities
debts not due for one year or more
what are accounts payable
current liabilities or bills the company owes others for merchandise or services purchased on credit but has not yet paid for
what are notes payable
can be short or long term liabilities, that a business promises to repay by a certain date
what are bonds payable
long term liabilities; money lent to the firm by bondholders that it must pay back
what is equity
assets minus the amount of money you owe others (liabilities)
what is stockholders equity/shareholders equity
value of what stockholders own in a firm - liabilities
what is owners equity
the amount of the business that belongs to the owners minus any liabilities owed by the business
whats an income statement
the statement that shows a firms bottom line or its profit after costs, expenses and taxes (it summarizes the revenue)
what is financial accounting
accounting info and analyses prepared for people outside the company
whats a private accountant
an accountant who works for a single firm, gov agency or non profit
whats a public accountant
an accountant who provides accounting services to individuals or businesses on a fee basis
whats a CPA
a certified public accountant: an accountant who passes a series of examinations established by the american institute of certified public accountants and meets the states requirement for education and experience
whats the sarbanes-oxley act
new goc reporting standards for publicly traded companies
what do managerial accounants do
provides info and analysis to managers inside the organization to help decision making
whats a tax accountant
a trained person in tax law and is responsible for preparing tax returns or developing tax strategies
whats the difference between booking and accounting
bookkeeping is part of accounting and includes the systematic recording of data
gross margin equation
revenue-cost of goods sold
equation for net income before taxes
gross margin-operating expenses
equation for net income or loss
net income before taxes- taxes
whats depreciation
the systematic write off of the cost of a tangible asset over its estimated useful life
what are retained earnings
the accumulated earnings from a firms profitable operations that are reinvested in the business and not paid out to stockholders in dividends
