Chapter 14 Using Financial Information and Accounting Flashcards
Key terms used in Chapter 14 of Openstax Introduction to business
Questions
Answers
The process of collecting, recording, classifying, summarizing, reporting, and analyzing financial activities is called __________.
accounting
___________ accounting provides financial information that managers inside the organization can use to evaluate and make decisions about current and future operations.
managerial accounting
___________ accounting focuses on preparing external financial reports that are used by outsiders such as lenders, suppliers, investors, and government agencies to assess the financial strength of a business.
financial accounting
The financial accounting standards followed by accountants in the United States when preparing financial statements is the __________________.
generally accepted accounting principles (GAAP)
The private organization that is responsible for establishing financial accounting standards in the United States is __________________.
Financial Accounting Standards Board (FASB)
The ________ is a yearly document that describes a firm’s financial status and usually discusses the firm’s activities during the past year and its prospects for the future.
annual report
_________ is the process of reviewing the records used to prepare financial statements and issuing a formal auditor’s opinion indicating whether the statements have been prepared in accordance with accepted accounting rules.
auditing
An accountant who has completed an approved bachelor’s degree program, passed a test prepared by the American Institute of CPAs, and met state requirements is called a(n) _______________. Only they can issue an auditor’s opinion on a firm’s financial statements.
certified public accountant (CPA)
_________________ accountants are employed to serve one particular organization.
private accountants
A managerial accountant who has completed a professional certification program, including passing an examination is called a(n) _______________.
certified management accountant (CMA)
_________ accountants independently serve organizations and individuals on a fee basis.
public accountants
The ____________, passed in 2002, set new standards for auditor independence, financial disclosure and reporting, and internal controls. It established an independent oversight board and restricts the types of non-audit services auditors can provide audit clients.
Sarbanes-Oxley Act
_______ are things of value owned by a firm.
assets
_____________, also called debts, are what a firm owes to its creditors.
liabilities
The total amount of investment in the firm minus any liabilities is called __________ or net worth.
owners’ equity
___________ is a method of accounting in which each transaction is recorded as two entries so that two accounts or records are changed.
double-entry bookkeeping
A financial statement that summarizes a firm’s financial position at a specific point in time is the ____________.
balance sheet
_________ is the speed with which an asset can be converted to cash.
liquidity
Assets that can or will be converted to cash within the next 12 months are ______ assets.
current assets