Intro to accounting Flashcards
What is accounting
- a system of dealing with financial information that is communicated to users
- two types: external and internal users
examples of external users
- creditors
- investors
- bank
- financial institution
- researchers
- government
- external auditor
what is a bank
a type of financial institution
what is an external auditor
a person who comes to the company to verify/check the financial information is correct and sign off based on their opinion
what is auditing
process of being an auditor
examples of internal users
- owner of company
- internal auditor
- CFO
- manager
what does an internal auditor do
makes sure no fraud is reported to the investors
what is the CFO
chief financial officer
what are the functions of accounting
- recording transactions
- summarize transactions into financial reports
- interpret the reports
- analyze data with numbers
what are transactions
an event where something of value is exchanged for another thing of value
what is booking keeping
- records transactions and summarizes financial reports
what is an accountant
- the job of accounting
how to become a accountant
- need to be designated
- to be designated you need to pursue an education after 4 years of uni/collage
- if you were a business major you don’t need to start from the beginning of the courses
- if you majored in something different you need to learn from the start
what is CPA stand for
- chartered professional accountant
- in USA it is called chartered public accountant
What was CPA before 2012
- CGA (certified general accountant)
- CMA (certified management accountant)
- CA (chartered accountant)
what are the 4 major accounting firms
- Price Waterhouse cooper (PWC)
- Ernest & Young (EY)
- KPMG
4 Deloitle & Touche
what are accounting firms
offers accounting services worldwide
what does the CPA institution do
- admisiter titles or qualified candidates
- make sure accountant name stays in the system by doing a certain amount of hours every year
- develop standards and rules
- makes a file of the qualified people
what was CPA institution before 2011
- GAAP (generally accepted accounting principals)
- every country has there own GAAP
After 2011 what standards were made
- IFRS
- IASB
- ASPE
- ACSB
what does IFRS stand for and when is it used
- international financial reporting system
- if a company is publicly traded
- need to disclose all information
what does IASB stand for and what does it do
- international accounting standard board
- writes rules for IFRS
what does ASPE stand for and when is it used
- accounting standards for private enterprise
- small/ private companies
what does ACSB stand for and what does it do
- accounting Canadian standard board
- writes rules for ASPE
what are assets
items or things a person or company owns that has value
examples of short term assets
- listed in order of fastest liquidity
examples: - cash/bank (money)
- accounts receivable
- inventory
- supplies
what does accounts receivable mean
the money the customer owns you
long terms assets
- listed in order of whichever lasts longer
examples:
1. Land
2. building
3. furniture
4. machinery/equipment
5. vehicles/automobile
6. computer
what is a service business
provides intangible goods
examples of service businesses
- uber
- moving trucks
- daycare
- doctors
- healthcare
- lawyer
what does liquidity mean
how fast you can sell the item
what are liabilities
the company’s debts
examples of liabilities
- in order of what is payed off first
examples:
1. account payable (within 30 days)
2. bank loan
3. mortgage payable
salaries payable (within a week)
tax payable
what is owner’s equity
- the owner’s net worth in the business
- the owner’s investment in the business
- the owner’s claim of the business
what does account payable mean
- money a company owns the suppliers
what is the fundamental accounting equation
- assets = liabilities + owners equity (money put in)
- A = L + OE
what are creditors
people who you own money to
What is a secured creditor
a creditor that makes you sign a contract saying that if you don’t pay off the debt the company can take your assets as compensation
what are the 3 GAAPs
- business entity
- principal of conservatism
- going concern/continuing concern
what is business entity
personal affairs should be kept separately from business affairs which means that personal assets should not be on a business balance sheet
what is principal of conservatism
a company should never overstate or understate it’s assets, liabilities, income and expenses
what is going concern/continuing concern
a company assume that it will exist in the near future (meaning in 6 months or a year)
