Financial and Managerial Accounting - Chapter 1

Providing information about the financial resources, obligations, and activities of an economic entity that is intended for use primarily by external decision makers-investors and creditors
Click the card to flip 👆
1 / 101
Terms in this set (101)
Providing information about the financial resources, obligations, and activities of an economic entity that is intended for use primarily by external decision makers-investors and creditors
Financial Accounting
Providing information that is intended primarily for use by internal management in decision making required to run the business.
Management (or managerial) accounting
The personnel, procedures, technology, and records used by an organization to develop information, including accounting information, and communicate that information to decision makers.
Information System
A process designed to provide reasonable assurance that the organization produces reliable financial reports, complies with applicable laws and regulations, and conducts its operations in an efficient and effective manner.
Internal Control
The foundation for all the other elements of internal control, setting the overall tone for the organization.
Control Environment
A process of identifying, analyzing, and managing those risks that pose a threat to the achievement of the organization's objectives.
Risk Assessment
Policies and procedures that management puts in place to address the risks identified during the risk assessment process.
Control Activities
The organization's process for capturing operational, financial, and compliance-related informations necessary to run the business, and communicating that information down-stream (from management to employees), upstream (from employees to management), and across the organization.
Information and Communication
The process of evaluating the effectiveness of an organization's system of internal control over time, including both ongoing management and supervisory activities and periodic separate evaluations.
Monitoring Activities
A landmark piece of securities law, designed to improve the effectiveness of corporate financial reporting through enhanced accountability of auditors , audit committees and management.
Sarbanese-Oxley Act
Individuals and other enterprises that have a financial interest in the reporting enterprise but are not involved in day-to-day operations of that enterprise (e.g. owners, creditors, labor unions, suppliers, customers)External UsersThe likelihood that an enterprise will be able to provide an investor with both a return on the investor's investment and the return of that investment.Cash Flow ProspectsThe repayment to an investor of the amount originally invested in a another enterprise.Return of InvestmentThe payment of an amount (interest, dividends) for using another's money.Return on InvestmentA declaration of information believed to be true and communicated in monetary terms.Financial StatementThe financial statement showing the financial position of an enterprise by summarizing its assets, liabilities, and owners' equity at a point in time. Also called the statement of financial position.Balance SheetAn activity statement that shows details and results of the company's profit-related activities for a period of time.Income StatementAn activity statement that shows the details of the companies activity involving cash during a period of time.Statement of Cash FlowsInformation that is intended to meet the needs of multiple users that have an interest in the financial activities of an enterprise rather than tailored to the specific information needs of one user.General-Purpose InformationIndividuals who use accounting information form within an organization (for example, board of directors, chief financial officer, plant managers, store managers).Internal UsersPrinciples that provide the framework for determining what information is to be included in financial statements and how that information is to be prepared and presented.Generally Accepted Accounting Principles (GAAP)A governmental organization hat has the legal power to establish accounting principles and and financial reporting requirements for publicly held companies in the United States.Securities an Exchange Commission (SEC)A private-sector organization that is responsible for determining generally accepted accounting principles in the United States.Financial Accounting Standards Board (FASB)The group responsible for creating and promoting International Financial Reporting Standards (IFRSs)International Accounting Standards Board (IASB)A quasi-governmental body charged with oversight of the public accounting profession. The PCAOB sets auditing standards for audits of publicly traded countries.Public Company Accounting Oversight Board (PCAOB)An examination of financial segments designed to determine their fairness in relation to generally accepted accounting principles.AuditA professional accounting organization of certified public accountants that engages in a variety of professional activities, including establishing auditing standards for private companies, conducting research, and preparing and grading the CPA exam.American Institute of CPAsA professional accounting organization that intends to influence the concepts and ethical practices of management accounting and financial management.Institute of Management Accountants (IMA)A professional accounting organization that is dedicated to the promotion and development of the practice of internal auditing.Institute of Internal Auditors (IIA)A professional accounting organization consisting primarily of accounting educators that is dedicated to improving accounting education, research, and practice.American Accounting Association (AAA)A voluntary private-sector organizations dedicated to improving the quality of financial reporting through enterprise risk management, effective internal control, and fraud deterrence.Committee of Sponsoring Organizations (COSO)Provides useful information for decisionsIn the pathways Commission's model of accounting, which of the following best describes the role of accounting information?An entity's financial resources and obligations.The term financial position is used to describe...decisionOne objective of an accounting system is to communicate accounting information to the ________ makersFalseTrue or False: All types of organizations need the same type of accounting information.Provides useful informationAccounting information...the value of the information produced should exceed the cost of producing itIn a cost-effective accounting information system, ________refers to the information describing the financial resources, obligations, and activities of an economic entityFinancial accounting __________interpret, recordA basic function of an accounting system is to _________ and __________ the effects of business transactions.meet the organization's information needsThe basic purpose of an accounting system is to _______management needs whether the organization is public or private the size of the organizationWhich factors determine an organization's need for information?financialInvestors and creditors are an example of individuals with a _________ interest in the company that benefits from an understanding of accounting measurementsTechnology has greatly increased cost effectiveness of accounting systems May produce information required by law and contract Should be cost effectiveWhich of the following correctly describe accounting systems?Summarize Communicate Record Classify InterpretWhich of the following are basic functions performed by an accounting system?Small businesses with limited resourcesWhich of the following are most likely to use standardized packaged accounting systems?Board of directors ManagementWhich groups are charged with developing and monitoring internal control?Internal auditors Systems analystIn a large business, which individuals are responsible for designing and improving the accounting system?to meet the organization's information needsThe basic purpose of an accounting system is ________Investors CreditorsTwo groups are considered the primary users of financial reporting, including financial statements: __________ and _________Produces reliable financial reports Conducts its operations in an effective manner Complies with applicable laws and regulations Conducts its operations in an efficient mannerInternal control is a process designed to provide reasonable assurance that the organization __________profit-relatedThe income statement is an activity statement that shows details and results of the company's _________-__________ activities for a period of timeUsefulness enhanced via explanation Inexact and approximate numbersIdentify the characteristics of externally reported information.Store managers Chief executive officerWhich of the following is a user of internal accounting information?CreditorsPrimary external users of accounting information include _________Management Board of directorsWhich groups are charged with developing and monitoring internal control?Providing a signal as to employee performance Evaluating and rewarding decision-making performanceA management accounting information system is useful in _________Balance sheetThe _____________ is a financial position statement that shows where the company stands in the financial terms at a specific dateNeeds to be provided to those with decision-making authority Needs to be timelyWhich of the following are characteristics of management accounting information?Press releases directly form companies Financial statements of companies Daily publications, such as the Wall Street JournalWhich of the following are reliable sources of financial information for investors and creditors?InvestorsWhich of the following is not an internal user of accounting information?CompleteWhich of the following is a characteristic of accounting information with integrity?They require authoritative supportWhat characterizes accounting principles?To help the enterprise achieve its goals To motivate management To motivate employees, including managementInformation provided by the management accounting system is useful for which of the following reasons?Efficiency EffectivenessAccounting information measures the _________ and _________ of resource usage.It completes its standards in the Accounting Standards Codification It is primarily responsible for promulgating GAAPWhich of the following characteristics describe the Financial Accounting Standards Board (FASB)?Sound Complete HonestInformation that has the characteristic of integrity has which of the following characteristics?ExaminationAn audit is an __________ of a company's financial statements, designed to determine the fairness of the statements.Evaluating and rewarding decision-making performance Providing a signal as to employee performanceA management accounting information system is useful in ________Needs to be timely Needs to be provided to those with decision-making authorityWhich of the following are characteristics of management accounting information?It works closely with the FASB in establishing GAAP It reviews the financial statements of public companies for compliance with GAAP.Which of the following characteristics describe the Security and Exchange Commission (SEC)?AICPAWhich organization is responsible for preparing and grading the CPA exam?generally accepted accounting principlesThe fairness of financial statements is judged in accordance with ___________Personal advantageThe AICPA's code of professional conduct calls for an unswerving commitment to honorable behavior, even at the sacrifice of _________To motivate management To motivate employees, including management To help the enterprise achieve its goalsInformation provided by the management accounting system is of use for which of the following reasons?Auditing financial statements Management advisory services Income tax workWhich of the following describes typical activities performed by a public accountant?OneAt any point in time, a management accountant typically works for __________ organizationAICPAPrior to the FASB, which organization had primary responsibility for promulgating accounting standards?Have accounting experience Pass the uniform CPA examination Be of good characterWhat are the requirements for becoming licensed as a CPA (in most states)the publicThe AICPA's code of professional conduct indicates that CPA's have responsibilities toTreasurer Controller Chief Financial OfficerIndividuals who move from public accounting firms into corporations often have which jobs?Chief Accounting OfficerIdentify 1 of the 3 corporate officers who is required to personally sign the form 10-K that a public company files with the SEC.SECWhich of the following organizations is viewed as the watchdog of financial reporting?AICPAWhich organization is responsible for preparing and grading the CPA exam?Auditing the university where he/she is employedWhich of the following is not generally a responsibility of an accounting faculty member?Interpreting information and making judgements Using accounting information as a member of upper managementWhich of the following differentiates between a bookkeeper and an accountant?Income tax work Auditing financial statements Management advisory servicesWhich of the following describes typical activities performed by a public accountant?GAOWhich of the following organizations is viewed as the auditor of the government?Public AccountingWhich entry level job is often viewed as providing the best stepping stone experience?revenue recognitionIt is particularly important for marketing, management, and other business students to understand accounting principles related toTeaching Consulting ResearchA position as an accounting faculty member generally involves which of the following?interpretation useWhereas bookkeeping is largely clerical in nature, professional accountants are more involved with the ___________ and __________ of accounting information.Opportunity to see inside many different businesses Preparation for future position in management Serves as a stepping stone for future accounting positionsWhich of the following are characteristics of starting one's accounting career in public accounting?Customers Creditors Regulators InvestorsList four external users of accounting information.TrueTrue or False: Accounting relies on inexact or approximate measures because many accounts in financial statements are dependent on judgment about future events and on an assessment of management intent.FalseTrue or False: The statement of financial position and the income statement are one and the sameThe value of the information exceeds the cost of producing itInformation is cost effective when:Provide people. outside the business organization with information about the company's financial position and operating resultsFinancial statements are designed primarily to:Income Tax ReturnThe general-purpose financial statements prepared annually by a corporation would not include the:InvestorsInternal users of financial accounting information include all of the following except:The cost of preparing the financial informationWhich of the following is not an important factor in ensuring the integrity of accounting information?Provide users of the financial statements with assurance that the statements are verifiable and are presented in conformity with generally accepted accounting principlesThe basic purpose of audited financial statements is to: