Module 1 Flashcards
5 basic functions of a business
~Human Resources
~marketing
~finance
~production
~management operations
Basic concepts of accounting
~business entity:personal record are separate from business records
~accrual: transactions that are recorded when they occur
~going concern: ability for a org to continue
~periodicity: reports of financial position of a business periodically
5 Basic elements of accounting
~Assets
~Liabilities
~Owners Equity
~Revenues
~Expenses
Cash basis income
(Received - paid)
Accrual basis income
(Services provided- wages)
3 types of business organizations
~sole proprietorship: one owner
~partnership: 2 people or more
~corporation: owned by shareholders of “many”
3 Types of Business Operations
Service business: provides service for a fee
Merchandising business: buys goods and sell for a larger price
Manufacturer: makes stuff
What is GAAP
General accepted accounting principles
*ruler makers
*pronouncement of principles in financial accounting standards
*statements of financial accounting concepts
Usefullness of GAAP?
Relevance- capable of making a difference in a decision
Reliability-dependable
Benefits > costs- benefits derived must be greater than cost
Materiality-large enough to have an impact on a decision.
Income statement
revenues and expenses
Statement of cash flows
Cash flows and inflows from operating, investing and financing activity for a period of time
Statement of owners equity
Changes in owners equity for a period of time
Balance sheet
Ending balances of assets, liabilities, and owners equity at a period in time
Auditors report
Indicates whether the company followed GAAP when prepping its financial statements
