Bus 101 C - 14
The Role of Accounting and Accounting Information
Terms in this set (62)
comprehensive system for collecting, analyzing, and communicating financial information
recording of accounting transactions
accounting information system (AIS)
organized procedure for identifying, measuring, recording, and retaining financial information for use in accounting statements and management reports
use accounting information to develop goals and plans, set budgets, and evaluate future prospects
employees and unions
use accounting information to plan for and receive compensation and such benefits as health care, vacation time, and retirement plan
investors and creditors
use accounting information to estimate returns to stockholders, determine growth prospects, and decide whether a firm is a good credit risk
use accounting information to plan for tax inflows, determine the tax liabilities of individuals and businesses, and ensure that correct amounts are paid on time
government regulatory agencies
rely on accounting information to fulfill their duties toward the public. for example, the securities and exchange commission (SEC), requires firms to file financial disclosures so that potential investors have valid information about their financial status
person or chief accounting officer who manages all of a firm's accounting activities
certified public accountant (CPA)
person licensed by the state and offering services to the public
field of accounting concerned with external users of a company's financial information. such as, investors and creditors
managerial (management) accounting
field of accounting that serves internal users of company's financial information. it provides reports and analysis to managers to help them make informed business decisions
systematic examination of a company's accounting system to determine whether its financial reports reliably represent its operations
generally accepted accounting principles (GAAP)
-accounting guidelines that govern the content and form of financial reports
-how accountants measure, process, and communicate financial information
assistance provided by CPA's for tax preparation and tax planning
management advisory services
assistance provided by CPA firms in areas such as financial planning, information systems design, and other areas of concern for client firms
emerging competencies for success in accounting
-skills in strategic thinking and critical problem solving.
-communications, interpersonal skills, and effective leadership.
-dedication to meeting customers needs.
-ability to integrate diverse information.
-proficiency with information technology.
(Table 14.1 p. 360)
salaried accountant who works for a single firm, government agency, or non profit organization, to carry out its day-to-day financial activities
-private accountant who provides financial services to support managers in various business activities within a firm.
-certified management accountant (CMA)
the practice of accounting for legal purposes such as, theft and fraud (expert witness),
certified fraud examiner (CFE)
professional designation administered by the Association of Certified Fraud Examiners in recognition of qualifications for a specialty area within forensic accounting
sarbanes - oxley act of 2002
-enactment of federal regulations to restore public trust in accounting practices by imposing new requirements on financial activities in publicly traded corporations.
-a CPA firm can help design a client's financial information system, but not if it also does the clients auditing
-Assets = Liabilities + Owner's Equity.
-used by accountants to balance data for the firms financial transaction at various points in the year.
-any economic resource expected to benefit a firm or an individual who owns it.
-house, land, gems, stocks, bonds, money in savings, etc.
-debt owed by a firm to an outside organization or individual.
-obligation, responsibility, or debt.
-the total of Google's liabilities - all the debt owed to others ($11.610 billion) at the end of 2010.
amount of money that owners would receive if they sold all of a firm's assets and paid all of its liabilities
-any of several types of reports summarizing a company's financial status to stakeholders and to aid in managerial decision making.
-balance sheet, income statement, statement of cash flows, and budget.
financial statement that supplies detailed information about a firm's assets, liabilities, and owner's equity
asset that can or will be converted into cash within a year
ease with which an asset can be converted into cash
asset with long-term use or value, such as land, buildings, and equipment
-accounting method for distributing the cost of an asset over its useful life.
-a lessening in value
debt that must be paid within one year
accounts payable (payables)
current liability consisting of bills owed to suppliers, plus wages and taxes due within the coming year
debts that are not due for at least one year
-earnings retained by a firm for its use rather than paid out as dividends.
-cumulative earnings of a company that are not distributed to the owners and are reinvested in the business
income statement (profit-and-loss statement)
financial statement listing a firm's annual revenues and expenses so that a bottom line shows annual profit or loss
funds that flow into a business from the sale of goods or services
cost of revenues
-costs that a company incurs to obtain revenues from other companies.
-beginning inventory + purchases - ending inventory
-costs, other than the cost of revenues, incurred in producing a good or service.
-costs involved in operating a business, such as rent, utilities, and salaries
-preliminary, quick-to-calculate profit figure calculated from the firm's revenues minus its cost of revenues (the direct costs of getting the revenues).
-net sales minus the cost of goods sold
gross Profit minus operating expenses
net income (net profit, net earnings)
gross profit minus operating expenses and income taxes
statement of cash flow
financial statement describing a firm's yearly cash receipts and cash paymants
formal recording and reporting of revenues at the appropriate time
guideline that financial statements should not include just numbers but should also furnish management's interpretations and explanations of those numbers
detailed statement of estimated receipts and expenditures for a future period of time
financial ratio, either short or long term for estimating the borrower's ability to repay debt
financial ratio for measuring a firms potential earnings
financial ratio for evaluating management's efficiency in using a firm's assets
short-term solvency ratio (quick ratio)
-financial ratio for measuring a company's ability to pay immediate debts.
-Quick Ratio = Current Asset - Inventory / Current Liability.
-financial ratio for measuring a company's ability to pay current debts out of current assets.
-current assets divided by current liabilities.
earnings per share
-profitability ratio measuring the net profit that the company earns for each share of outstanding stock.
-net income divided by the number of shares outstanding
a company's total liabilities
ability to finance an investment through borrowed funds
code of professional conduct
code of ethics for CPA's as maintained and enforced by the American Institute of Certified Public Accountants (AICPA)
international accounting standards board (IASB)
-organization responsible for developing a set of global accounting standards and for gaining implementation of those standards.
-determines how accounting is practiced internationally.
cost of goods sold
costs of obtaining materials for making the products sold by a firm during the year
-amount paid for an existing business above the value of its other assets.
-advantage or reputation a business has acquired, its name.
money that is invested in a company by its owners
nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit
certified management accountant (CMA)
professional designation awarded by the Institute of Management Accountants in recognition of management accounting qualifications