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20 Cards in this Set
- Front
- Back
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Purpose of Accounting |
Provide financial information about current operations and financial conditions of a business to individuals or organizations |
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Users of Accounting Info |
Owners Managers Creditors Government Agencies |
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Info needed by owners |
Company profitability and current financial condition |
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Info needed by managers |
Detailed measures of business performance |
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Info needed by creditors |
Company profitability, debt outstanding and assets that could be used to secure debt. |
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Info needed by government agencies |
Company's profitability, cash flows, and overall financial condition. |
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6 Major steps of accounting process |
Analyzing Recording Classifying Summarizing Reporting Interpreting |
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Analyzing |
Step 1 of accounting process. Looking at events that have taken place and thinking about how they affect the business. |
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Recording |
Step 2 of accounting process. Entering financial info about events into the accounting system. |
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Classifying |
Step 3 of accounting process. Sorting and grouping similar events together. |
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Summarizing |
Step 4 of accounting process. The aggregation of many similar events to provide information that is easy to understand. |
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Reporting |
Step 5 of accounting process. Telling the results. |
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Interpreting |
Step 6 of accounting process. Deciding the meaning and importance of the info in various reports. |
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GAAP |
Generally Accepted Accounting Principles. Rules managed and enforced by the FASB. FASB- Financial accounting standards board.
FASB encouraged by the SEC |
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IASB |
Internation Accounting Standards Board. Issues standards followed by many countries outside the U.S. called the IFRS (International financial reporting standards) IASB and FASB have been working together to minimize differences. |
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Three types of ownership structures |
Sole proprietorship Partnership Corporation |
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Sole Proprietorship |
One owner.
Owner assumes all risk including personal assets.
Owner makes all the decisions. |
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Partnership |
Two or more partners
Share risk and decision making
May disagree on how to run the business. |
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Corporations |
Owned by stockholders
Limited risk to stockholders
Stockholders have limited influence upon decisions. |
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Three types of businesses |
Service Merchandising Manufacturing
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