The Purpose of Accounting Flashcards
The American Institute of Certified Public Accountants is the national organization that represents accountants in the United States.
AICPA
is a collection of financial information about an enterprise. In particular the role of accounting is to analyze, measure, record and report financial information in an organized way so that interested people may use it to help them make decisions.
Accounting
usually conduct routine tasks in specific areas of the accounting system and are often given specialized titles for the area in which they work.
Accounting clerks
are the investments needed to carry out the business activity . Typical examples of assets include land, building, equipment, inventory and cash
Assets
Something we presume is true about the company .
Assumptions
To verify that what is reported in the financial statements conforms to generally accepted accounting principles or standards.
Auditing
While not licensed professionals, bookkeepers perform the general accounting work. They may perform most of the accounting duties and supervise other employees, such as accounting clerks. They may not perform the professional audit function.
Bookkeepers:
Certified Public Accountant. Licensed professional accountant.
CPA
An idea. Accounting concepts are desirable ideas that further the goal of providing useful financial information.
Concept:
is a business that is incorporated under the laws of a particular country or state. The owners of the business are called shareholders or stockholders.
Corporation
lend funds, usually money , to the company . Creditors have a legal right to be repaid the amount lent, together with interest.
Creditors
What is left for the owners after all the creditors have been paid. What they own free and clear.
Equity:
The resources used in order to make revenues. Salaries of employees are an expense. The office supplies used in everyday business are another example of an expense.
Expenses:
The Financial Accounting Standards Board (FASB) of the AICPA. This Board has the sole responsibility to establish and improve the accounting concepts and principles to help accountants deal with the many difficult issues that arise in a changing world.
FASB:
concerns itself with preparing reports mainly for those outside the company .
Financial accounting
generally consist of cash, but there also may be other resources such as inventory .
Funds
Generally accepted accounting principles (see “Principles”).
GAAP:
The goals of any business establish what the business hopes to achieve.
Goals:
The reward many creditors receive for lending money . It is a charge for using their money .
Interest:
Once the company has obtained funds for the business, it must invest those funds. The funds are invested in assets.
Investments
Something (like a corporation) that is considered to be an artificial person and can enter into legal contracts, just like a real person. An important note: unlike a real person, a legal entity (the corporation) does not have to die. Corporations have unlimited lives.
Legal entity
What you owe your creditors. You are liable to your creditors.
Liabilities
This means the owners can not be held personally responsible for debts of the firm. Their liability is limited to the money they have invested in the firm. Owners, i.e., shareholders, of a corporation enjoy limited liability
Limited liability
concerns itself with preparing reports to be used by managers inside the company .
Managerial accounting
We will value our resources in dollars.
Monetary unit assumption
Once a company establishes its goals, sets its strategies, obtains financing and invests in assets, it is ready to carry out operations. Conducting its business.
Operations
A ………….. is a legal agreement between two or more individuals to operate a business enterprise. At least one of the partners has unlimited liability for the debts of the business.
Partnerships
Generally accepted accounting principles – or standards – help us to ensure the accounting reports are useful. These principles are the rules accountants follow to ensure good accounting practice.
Principles
Normally , the goal of a business is to operate the business at a profit. Profits are made when what the company takes in (revenues) are greater that what it must send out (expenses).
Profits:
What is available for the company to use (assets).
Resources:
Normally a result of the business making sales. The resources earned by operating the business.
Revenues
This assumption states that a business enterprise should be accounted for separately from its owners.
Separate entity assumption:
is a business owned by one individual, and is the simplest form of business organization.
Sole proprietorship
of the business describe how management plans to achieve its goals.
Strategies
