chp 15 Flashcards
accounting
the process of measuring, interpreting, and communicating financial information to enable people inside and outside the firm to make informed decisions
uses of accounting information
managers with a business, government agency or not for profit are major users of accounting information, because it helps them plan and control daily long-range operations
financing acitivies
provide necessary funds to strat a business and expand it after it begins operating.
operating activities
focus on selling goods ans services but they also consider expenses as important elements of sound financials
investing activities
provide valuable assets required to run a business
the accounting cycle
the procedure by which accountants convert data about individuals transactions to financial statements
The accounting equation
Assets must equal liabilities plus owners’ equity. This equation reflects the financial position of a firm at any point in time.
assets
anything owned or leased by the company
liability
Anything owed to creditors—that is, the claims of a firm’s creditors
owners equity
the owners initial investment in he business plus profits that were not paid out to owners over time in the form of cash dividends
double entry bookkeeping
accounting transactions are recorded
balance sheet
accounting statements that show the financial position of a company as of a particular date and make explicit the basic accounting equation
income statement
accounting statements that show the income expenses and profit or losses of a company during a period of time
Statement of changes in equity
a record of the change in equity from the end of one fiscal period to the end of the next
Budget
A planning and controlling tool that reflects
the firm’s expected sales revenues, operating
expenses, and cash receipts and outlays.
