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23 Cards in this Set
- Front
- Back
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Accounting Defined:
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A system that identifies, records, and communicates information that is relevant, reliable, and comparable to help users make better decisions.
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Financial Accounting:
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Serves external users by providing financial statements.
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Examples of external users:
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Investors, bankers, vendors, and customers
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Managerial Accounting:
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Serves decision making needs of internal users. Internal users are directly involved in managing and operating the business.
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Examples of internal users:
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Managers, dept. heads, cfo, ceo.
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How many principles of accounting are there?
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6
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Objectivity:
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Information is supported by independent, unbiased evidence.
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Cost Principle:
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Based on actual (historical) cost.
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Going-Concern Principle:
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Assumption that the business will continue operation without being closed or sold.
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Monetary Unit Principle:
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Express transactions or events in monetary or money units.
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Revenue Recognition Principle:
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Record revenue when it is earned. The proceeds don't have to be in cash.
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Business Entity Principle:
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Businesses are accounted for separately from the owners and from other businesses.
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3 Legal Forms of A Business Entity
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Sole proprietorship, partnership, and corporation.
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Assets:
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Resources that are owned or controlled by a company. Expected to provide future benefit.
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Examples of assets:
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Cash, accts rec, notes rec, land, bldings, equip, inventory, vehicles, prepaid accts, and supplies.
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Liabilities:
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Creditors claim to assets
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Examples of liability:
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A/P, notes payable, accrued liabilities, wages pay, taxes pay, interest pay.
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Equity:
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The owners claim to assets
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Net Income=
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Revenue-Expenses
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Dividends are
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distributions to owners.
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Financial Statements in order:
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Income statement, statement of retained earnings, balance sheet, and statement of cash flows.
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Return on Assets:
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A profitability measure that is useful in evaluating management, analyzing and forecasting profits, and planning activities.
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ROA=
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Net Income/Average Total Assets
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