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31 Cards in this Set
- Front
- Back
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Accounting and financial statements are the means for ___________ ___________ |
Communicating numbers |
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Accounting consists of 3 basic activities. What are they? |
1. Identifies 2.Records 3.Communicates the economic events of an organization to interested users |
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Identifies |
economic event examples such as sale of chips |
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Records |
consist of keeping a systematic, chronological diary of events, measured in dollars and cents |
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Communicates |
collected information to interested users by means of accounting reports |
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The most common report is |
a financial report |
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Where is data reported? |
the aggregate |
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Anaylsis |
includes use of ratios, percentages, graphics, and charts to highlight significant financial trends and relationships |
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interpretation |
involves explaining the users, meaning, and limitations of reported data |
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Who uses accounting data? |
Internal and external users |
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Internal users |
Of accounting information are managers who plan, organize,and run the business |
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what are examples of internal users |
marketing managers, production supervisors, and company officers |
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Managerial Accounting |
Provides internal reports to help users make decisions about their companies |
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External Users |
Individuals and organizations outside a company who want financial information about the company |
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what are the two most common types of external users? |
investors and creditors |
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Investors (owners) |
use accounting information to decide wether to buy, hold, or sell ownership shares of a company. |
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Creditors (such as suppliers and bankers) |
use accounting information to evaluate the risks of granting credit or lending money |
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Financial Accounting |
answers the questions it provides financial information for investors, creditors, and other external users. |
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Ethics |
The standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or unfair. |
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Historical cost of Principles |
dictates that companies record assets at their cost. *true when assets bought and held at the same cost. |
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Fair value principle |
States that assets and liabilities should be reported at fair value ( the price received to sell an asset) |
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Assumptions |
Monetary and Economic |
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Monetary unit assumption |
requires that companies include in the accounting records only transaction data that can be expressed in money terms |
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monetary unit assumption is vital to |
applying the historical cost principle |
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Economic entity Assumption |
can be any organization or unit in society |
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The economic entity assumption requires that |
the activities of the entity be kept separate and distinct from the activities of its owner and all the other economic entities |
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Proprietorship |
a business owned by one person |
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corporation |
a business organized as a separate legal entity under state corporation law and having ownership divided into transferable shares of stock |
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assets |
what the company owns |
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liabilities |
what the company owes |
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stock holders equity |
the ownership claim on a corporations total assets. |
