Lesson One: Definitions

Question 1

Accounting:

Answer 1

An informational and measurement system that identifies, records, and communicates an organization’s business activities.

Question 2

Identifying:

Answer 2

Select transactions and events.
Ex. Apple’s sale of Iphones, or Peacock’s receipt of subscription money.

Question 3

Recording:

Answer 3

Input, measure, and log.
Ex. dated logs of transactions measured in dollars.

Question 4

Communicating:

Answer 4

Prepare, analyze, and interpret.
Ex. reports that we analyze and interpret.

Question 5

Recordkeeping or Bookkeeping:

Answer 5

Recording of transactions and events.

Question 6

Financial Accounting:

Answer 6

Focuses on the needs of external users.

Question 7

Managerial Accounting:

Answer 7

Focuses on the needs of internal users.

Question 8

External Users:

Answer 8

They do not directly run the organization and have limited access to its accounting information.
Ex. Lenders, shareholders, boards of directors, external (independent) auditors, nonmanagerial employees, nonexecutive employees, labor unions, regulators, voters, government officials, contributors, suppliers, and customers.

Question 9

General-Purpose Financial Statements:

Answer 9

External users use these to get accounting information.

Question 10

Lenders or Creditors:

Answer 10

They loan money or other resources to an organization. They use information to assess if an organization will repay its loans.

Ex. banks, savings and loans, and mortgage companies.

Question 11

Shareholders or Investors:

Answer 11

They are the owners of a corporation. They use accounting reports to decide whether to buy, hold, or sell stock.

Question 12

Board of Directors:

Answer 12

They oversee organizations and are NOT involved in day-to-day operations. Directors use accounting information to evaluate the performance of executive management.

Question 13

External (Independent) Auditors:

Answer 13

Examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Question 14

Nonmanagerial and Nonexecutive Employees and Labor Unions

Answer 14

Use external information to bargain for better wages.

Question 15

Regulators:

Answer 15

Have legal authority over certain activities of organizations.
Ex. the IRS requires accounting reports for computing taxes.

Question 16

IRS:

Answer 16

Internal Revenue Service, in charge of computing taxes for every business in the country.

Question 17

Contributors to Non Profits:

Answer 17

Use information to evaluate the use and impact of donations.

Question 18

Suppliers:

Answer 18

Use information to analyze a customer before extending credit.

Question 19

Customers:

Answer 19

Use financial reports to assess the stability of potential suppliers.

Question 20

Internal Users:

Answer 20

They directly manage the organization.

Ex. purchasing managers, human resource managers, production managers, distribution managers, marketing managers, service managers, research and development managers, and others.

Question 21

Internal Reports:

Answer 21

Are designed for the unique needs of managerial or executive employees.

Ex. The CEO

Question 22

Purchasing Manager:

Answer 22

Need to know what, when, and how much to purchase.

Question 23

Human Resource Managers:

Answer 23

Need info about employee’s payroll, benefits, and performance.

Question 24

Production Managers:

Answer 24

Use info to monitor costs and ensure quality.

Question 25

Distribution Managers:

Answer 25

Need reports for timely and accurate delivery of products and services.

Question 26

Marketing Managers:

Answer 26

Use reports to target consumers, set prices, and monitor consumer needs.

Question 27

Service Managers:

Answer 27

Use reports to provide better service to customers.

Question 28

Research and Development Managers:

Answer 28

Use info on projected costs and revenues of innovations.

Question 29

Private Accounting:

Answer 29

Employees are working for businesses.

Question 30

Public Accounting:

Answer 30

Involves accounting services like auditing, taxation, and advisory services. They can also work for the government, non profit agencies, including business regulation and enforcement.

Question 31

Financial Accounting Examples:

Answer 31

Preparation, analysis, external auditing, regulatory, consulting, planning, and criminal investigation.

Question 32

Managerial Accounting Examples:

Answer 32

General acctg, cost acctg, budgeting, internal auditing, consulting, controller, treasurer, and strategy.

Question 33

Taxation Accounting Examples:

Answer 33

Preparation, planning, regulatory, investigations, consulting, enforcement, legal services, and estate plans.

Question 34

Accounting- Related Job Examples:

Answer 34

Lenders, consultants, analysts, traders, directors, underwriters, planners, appraisers, FBI investigators, market researchers, systems designers, merger services, business valuation, forensic accounting, litigation support, and entrepreneurs.

Question 35

Data Analytics:

Answer 35

A process of analyzing data to identify meaningful relations and trends.

Question 36

Data Visualization:

Answer 36

A graphical presentation of data to help people understand their significance. This helps people make informed business decisions.

Question 37

Fraud Triangle:

Answer 37

Three factors that push a person to commit fraud:
1. Opportunity
2. Pressure or Incentive
3. Rationalization or Attitude

Question 38

Internal Controls:

Answer 38

Procedures to protect assets, ensure reliable accounting, promote efficiency, and uphold company policies.

Question 39

Auditors:

Answer 39

Verify the effectiveness of internal controls.

Question 40

GAAP:

Answer 40

Generally accepted accounting principles.

Question 41

FASB or Financial Accounting Standards Board:

Answer 41

It’s given the task of setting the GAAP.

Conceptual framework includes:
-Objectives: to provide information useful to investors, creditors, and others.
-Qualitative characteristics: to require information that has relevance and faithful representation.
-Elements: to define items in financial statements.
-Recognition and measurement: to set criteria for an item to be recognized as an element; and how to measure it.

They follow the SEC.

Question 42

SEC or Securities and Exchange Commission:

Answer 42

A U.S. government agency that oversees proper use of GAAP by companies that sell stock and debt to the public.

Question 43

Audit:

Answer 43

Examines whether financial statements are prepared using the GAAP.

Question 44

IASB Or International Accounting Standards Board:

Answer 44

Issues the IFRS. Similar to but slightly different from the US GAAP. The FASB and IASB are working to reduce differences between the US GAAP and IFRS.

Question 45

IFRS or International Financial Reporting Standards:

Answer 45

An international report that identifies preferred accounting practices.