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Accounting 1
Accounting chapter 1 WGU C213
| Term | Definition |
|---|---|
| People who use financial accounting: | managerial accounting- that inside the company financial accounting is for outside the company |
| accounting | record of day-to-day financial activies into summary reports (used to evaluate the companies financial status) -helps with financial decisions -helps forcasting |
| bookkeeping: | preservation of a systematic quantitative record of an activity - phone record - apt rent pmt records - class grading records -sports stats |
| Managerial accounting: | gathering analysis of information for the purpose of internal decision making - Product costs - Breakeven analysis - Budgeting - Performance evaluation Outsource production |
| Financial accounting | for gathering, reporting and analysis for info primarily for the benefit of external uses such as investors and creditors - Credit analysis - Regulator uses (such as financial health of bank and insurance companies) Estimate the value of a company |
| Balance Sheet questions | (Assets = liabilities + equity) ○ List in point in time ○ Resources (assets) Obligations (liabilities) |
| Income statement questions | (expenses > revenues = company suffered a loss for a period) ○ Period of time (like year) How much profit did we make? |
| Statement of cash flows questions | ○ Period of time (like year) Where did our cash come from? Where did it go? |
| Operating activities inflow | selling goods providing services |
| Operating activies outflow | paying wages paying utilities paying taxes |
| investing activities inflow | selling buildings selling land |
| investing activates outflow | purchasing buildings purchasing land |
| financial activities inflow | borrowing money receiving inventory |
| financial activities outflow | repay loans distribution to owners |
| External users of Financial accounting data | Lenders - Will the loan be repaid - Current income - Existing obligations - Existing assets Investors - Is the business profitable now? What is the potential for the future? |
| Internal Users of financial accounting data | Management - Planning - Daily monitoring Evaluation |
| Other external users of Financial information | - Suppliers - Customers - Employees - Competitors - Gov - Politicians The press |
| Financial Accounting Standards Board (FASB): | established in 1973 US accounting standards NOT a gov agency and cannot legally enforce the accounting standards it sets |
| Generally accepted accounting principles (GAAP): | set of accounting rules and practices that standardize how financial information is reported in the US |
| Securities and Exchange Commission (SEC): | - regulate US stock exchanges - seeks to create a fair information enviorment in which investors can buy and sell stocks without fear that companies are hiding or manipulating financial data |
| Certified Public Accountant (CPA): | CPA- works as an accountant CPA firm- works as a business consultant, corporate managers or accounting professors |
| American Institute of Certified Public Accountants (AICPA): | responsible for preparing and grading the CPA examination, maintaining the integrity of accounting profession with Code of Professional Conduct. It’s a professional organizations of CPA in US |
| Public Company Accounting Oversight Board (PCAOB): | private, non-private organization that effectively serves as an arm of the SEC in registering, inspecting and disciplining the auditors of all publicly traded companies |
| any firm that wishes to audit a company that is publicly traded in the US must be registered to | PCAOB- public company accounting oversight board |
| Internal Revenue Services (IRS)- | gov agency responsible for tax collection and tax law enforcement |
| International Accounting standards Board (IASB)- | -formed in 1973 -independent, international body formed to develop worldwide accounting standards -turned into IASC (internal accounting standards committee) |
| 3 main financial statements | balance sheet income statement statement of cash flow |
| balance sheet | reveals what a company owns and owes |
| income statement | companies financial performance for a specific period of time Revenue - expenses = net income or net loss |
| statement of cash flow | Individual cash flow items that are classified according to three main activities: operating, investing, and financing Summarize a company's cash flows for a period of time. |
| International financial reporting standards (IFRS) | accounting standards produced by the (IASB) |
| Sarbanes Oxley accounting | -created 2002 after several fraudulent info -enforces that CPAs register with PCAOB to complete companies audits |
Created by:
1piper4me
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