Chapter 16 Understanding Accounting and Financial Information Flashcards
Managerial Accounting
Accounting used to provide information and analyses to managers inside the organization to assist them in decision making
Financial Accounting
Accounting information and analyses prepared for people outside the organization
Annual Report
A yearly statement of financial condition, progress and expectations of an organization
Compliance
The job of reviewing and evaluating the records used to prepare a companies financial statements
Independent Audit
An evaluation and unbiased opinion about the accuracy of a companies financial statements
Forensic Accounting
A relatively new area of accounting that focuses its attention on fraudulent activity
Tax Accounting
An accountant trained in tax law and responsible for preparing tax returns or developing tax strategies
Private Accountant
An accountant who works for a single firm, government agency or non-profit organization
Public Accountant
An accountant who provides his or her accounting services to individuals or businesses on a fee basis
Chartered Accountant
An accountant who has met the examination, education, and experience requirements of the society of management accountants of canada
Certified Management Accountant
An accountant who has met the examination, education and experience requirements of the society of management accountants of canada
Accounting
The recording, classifying, summarizing and interpreting of financial events to provide management and other interested parties the financial information they needs to make good decisions
Accounting Cycle
A six-step procedure that results in the preparation and analysis of the major financial statements
Bookkeeping
The recording of business transactions
Journal
The record book where accounting data is first entered
Double-entry Bookkeeping
The concept of every business transaction affecting at least 2 accounts
Fundamental Accounting Equation
Assets are equal to liabilities pus owners equity; this is the basis for the balance sheet
Ledger
A specialized accounting book in which information from accounting journals is accumulated into accounts and posted so that managers can find all of the information about a specific account in one place
Trial Balance
A summary of all the data in the account ledgers to show whether the figures are correct and balanced
Financial Statement
A summary of all of the transactions that have occured over a particular period
Balance Sheet
The financial statement that reports a firms financial condition at a specific time and is composed of 3 major types of accounts: assets, liabilities and owners equity
Assets
Economic resources owned by a firm
Liquidity
How fast an asset can be converted into cash
Current Assets
Items that can be converted into cash within one year
Capital Assets
Assets that are relatively permanent, such as land, buildings or equipment
Intangible Assets
Long term assets that have no real physical form but do have value
Liabilities
What the business owes to others
Accounts Payable
Current Liabilities are bills a company owes to others for merchandise or services purchased on credit but not paid for yet
Notes Payable
Short term or long term liabilities that a business promises to repay by a certain date
Bonds Payable
Long term liabilities that represent money lent to a firm that must be paid back
Taxes Payable
Sales taxes and GST or HST collected and income tax payable
Owners Equity
The amount of the business that belongs to the owners minus any liabilities owned by the business
Retained Earnings
The accumulated earnings from a firms profitable operations that remains in the business and not paid out to shareholders or dividends
Net income
Revenue left over after all costs and expenses, including taxes, are paid
Gross Profit
How much a firm earned by buying and selling merchandise
Operating Expenses
Costs involved in operating a business, such as rent, utilities and salaries
Cash Flow
The difference between cash coming in and cash going out of a business
Amortization
The systematic write off of the cost of a tangible asset over its estimated useful life
Matching Principle
Revenues are recorded with earned and expenses are recorded when incurred
