Chapter 17 Flashcards
The recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions
Accounting
Accounting used to provide information and analyses to managers inside the organization to assist them in decision making
Managerial Accounting
A professional accountant who has met certain educational and experience requirements, passed a qualifying exam, and been certified by the Institute of Certified Management Accountants
Certified Management Accountant (CMA)
Accounting information and analyses prepared for people outside the organization
Financial Accounting
A yearly statement of the financial condition, progress, and expectations of an organization
Annual Report
An accountant who works for a single firm, government agency, or nonprofit organization
Private Accountant
An accountant who provides accounting services to individuals or businesses on a fee basis
Public Accountant
An accountant who passes a dries of examinations established by the American Institute of Certified Public Accountants (AICPA)
Certified Public Accountant (CPA)
The job of reviewing and evaluating the information used to prepare a company’s financial statements
Auditing
An evaluation and unbiased opinion about the accuracy of a company’s financial statements
Independent Audit
An accountant who has a bachelor’s degree and two years of experience in internal auditing, and who has passed an exam administered by the Institute of Internal Auditors
Certified Internal Auditor (CIA)
An accountant trained in tax law and responsible for preparing tax returns or developing tax strategies
Tax Accountant
Accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget
Government and Not-For-Profit Accounting
A six-step procedure that results in the preparation and analysis of the major financial statements
Accounting Cycle
The recording of business transactions
Bookkeeping
The record book or computer program where accounting data are first entered
Journal
The practice of writing every business transaction in two places
Double-entry bookkeeping
A specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place
Ledger
A summary of all the financial data in the account ledgers that ensures the figures are correct and balanced
Trial Balance
A summary of all the transactions that have occurred over a particular period
Financial Statement
Assets= Liabilities + Owner’s Equity; this is the basis for the balance sheet
Fundamental Accounting Equation
Financial statement that reports a firm’s financial condition at a specific time and is composed of three major accounts: assets, abilities, and owner’s equity
Balance Sheet
Economic resources (things of value) owned by a firm
Assets
The ease with which an asset can be converted into cash
Liquidity
Items that can or will be converted into cash within one year
Current Assets
Assets that are relatively permanent, such as land, buildings, and equipment
Fixed Assets
Long-term assets (e.g. patents, trademarks, copyrights) that have no real physical form but do have value
Intangible Assets
What the business owes to others (Debt)
Liabilities
Current liabilities are bills the company owes to others for merchandise or services purchased on credit but not yet paid for
Accounts Payable
Short-term or long-term liabilities that a business promises to repay by a certain date
Notes Payable
Long-term liabilities that represent money lent to the firm that must be paid back
Bonds Payable
The amount of the business that belongs to the owners minus any liabilities owed by the business
Owner’s Equity
The accumulated earnings from a firm’s profitable operations that were reinvested in the business and not paid out to stockholders in dividends
Retained Earnings
The financial statement that shows a firm’s profit after costs, expenses, and taxes; it summarizes all the resources that have come into the firm (revenue), all the resources that have left the firm (expenses), and the resulting net income or net loss
Income Statement
Revenue left over after all costs and expenses, including taxes are paid
Net income or net loss
A measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale
Cost of Goods Sold (or cost of good manufactured)
How much a firm earned by buying (or making) and selling merchandise
Gross Profit (or gross margin)
Costs involved in operating a business, such as rent, utilities, and salaries
Operating Expenses
The systematic write-off of the cost of a tangible asset over its estimated useful life
Depreciation
Financial statement that reports cash receipts and disbursements related to a firm’s three major activities: operations, investments, and financing
Statement of Cash Flows
The difference between cash coming in and cash going out of a business
Cash Flow
The assessment of a firm’s financial condition using calculations and interpretations of financial ratios developed from the firm’s financial statements
Ratio Analysis
