class notes Flashcards
What does CPA stand for?
Certified Public Accountant
CPA is a top accounting certification requiring state certification, high education requirements, a difficult exam, and ongoing education.
What are the education requirements for CPA certification in NJ?
150 credits + work experience
This is a high requirement for CPA certification in New Jersey.
What is the role of a CFO?
Head of the accounting function / chief financial officer, chief
CFOs are typically associated with high pay.
Define Accounts Receivable (AR).
How much money is owed to the company
AR is a key aspect of accounting that reflects the outstanding invoices a company has.
Define Accounts Payable (AP).
How much money the company owes to other people
AP represents the company’s obligations to pay off short-term debts.
What is depreciation?
Non-cash business expense allocated & calculated over the period that an asset is useful to business . Reduction in value of an asset over time
Depreciation affects the value of assets over time.
What does accrual mean in accounting?
An asset or liability that represents an expense that was made in one accounting period but not paid yet
This accounting method recognizes revenues and expenses when they occur, regardless of cash flow.
What is the role of a treasurer?
Makes sure there’s enough money, deals with banks, lends money to other companies
Treasurers play a critical role in managing a company’s finances.
What is the primary responsibility of a controller?
Responsible for producing all financial statements
Controllers ensure accuracy and compliance in financial reporting.
What is a trial balance?
A statement of all debits and credits in a double-entry account book. It is like a financial statement’s first draft because it allows a bookkeeper to check for errors (errors would be differences in debits and credits)
It helps verify that the total debits equal total credits in the accounting records.
What is a line of credit?
Flexible financing option that allows businesses to borrow funds up to a certain limit (limit is set by lenders)
A line of credit is determined by lenders based on risk assessment.
What is the function of a credit department?
Approves orders that come through
This department assesses the creditworthiness of customers.
What is an annual report?
Less truthful (more glossy), required for publicly traded companies, function of a CPA
Annual reports provide a summary of a company’s performance over the year.
What is included in a 10K report?
Who’s being sued, inside info — compensation for key executives
A 10K report is a comprehensive annual report filed by public companies.
What is a tax return?
Every company must publish one, CFO accountable for this
Tax returns provide information on a company’s income and expenses to tax authorities.
What are the types of bankruptcy under federal law?
- Chapter 7 Bankruptcy – Company is out of business
- Chapter 11 – Company is in financial trouble
These are the two main types of bankruptcy filings for businesses.
What does ‘goodwill’ refer to in financial statements?
How much the company’s name and/or products are worth
Goodwill is an intangible asset that reflects the value of a company’s brand.
What does the Sarbanes-Oxley Act (SOX) do?
Holds management of company responsible for the accuracy of the finances they publish
SOX was enacted to protect investors from fraudulent financial reporting.
What are the two types of audits?
- Financial Audit – Produces annual report, done by outside audit firm
- Internal Audit - addresses risks and optimizes business processes
Audits ensure compliance and accuracy in financial reporting.
What is a balance sheet?
Assets / Everything the company owns, primary document
It details the company’s assets, liabilities, and equity at a specific point in time.
What is an income statement?
How much money goes to revenue, operating expense, net profit or loss
Income statements summarize revenues and expenses over a specific period.
What is a budget in financial accounting?
Major document, tedious to create, yearly calculations
Budgets are essential for planning and controlling financial resources.
Fill in the blank: Management has ‘feet held to fire’ to meet _______.
budgets
This phrase indicates the pressure management faces to adhere to financial plans.
List some common categories of expenses in a budget.
- Labor
- Supplies
- Utilities
- Dues
These categories help in organizing and tracking expenses effectively.
