Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
11 Cards in this Set
- Front
- Back
|
What are the three general uses of accounting?
|
Financial reporting and external performance evaluation.
Managerial decision making. Managerial planning, control, and internal performance evaluation. |
|
|
What are the four types of accounting?
|
Financial Accounting
Tax |
|
|
What is the nature and importance of corporate governance for Equity Investors & Debt Investors?
|
Equity investors: purchase shares of stock, which represent ownership in the company. The financials are used by investors to analyze management’s decisions. –
Debt investors (creditors): provide capital through loans. The financials are used by creditors to assess likelihood of default. |
|
|
What is the nature and importance of corporate governance for Management and "others"?
|
Management: uses other companies financials to asses thecompetition.
Others, including government bodies, laborunions, employees, use financials to assess the financial status of thecompany. |
|
|
What is the nature and importance of corporate governance for Capital Markets?
|
Capital markets: value the publicly traded equity and debt securities. The financials are a component of the information that the markets use to value companies securities, along with a number of non-financial measures. The market reacts to financial and other information as it is released by management
|
|
|
How are accounting standards set?
|
TheSecurities and Exchange Commission (SEC) governs financial reporting forpublicly traded companies. Congress and other regulatory agencies haveinfluence with the SEC.l TheFinancial Accounting Standards Board (FASB) is responsible for the promulgationof generally accepted accounting principles (GAAP) for financialstatements. The FASB accepts input fromall interested parties, including accountants, corporations, academics, andgovernmental entities.
|
|
|
What are the steps of accounting standards creation? |
Step 1 Policy Makers – SEC orFASB - FASB Writes Exposure Draft GenerallyAccepted Accounting Principles ActualAccounting Practices EconomicConsequences PerceivedEconomic Consequences Step 2 Public Looks at it –Public Hearings, Letters Step 3 Government Provides Input– Congress, White House, and Government Agencies |
|
|
What is the Sarbanes-Oxley Act? |
Passedby Congress in 2002, in response to a series of corporate scandals. Requiresprincipal executive and financial officers to certify a number of statementsregarding the financials. Placesadditional responsibilities on management to ensure that adequate internalcontrols are in place. |
|
|
What an audit opinion says?
|
The auditor’s report is a statement to the board of directors of the company and to the shareholders of the company by an independent auditor. It expresses an opinion as to whether the financial statements present fairly the financial activities of the company and whether the financials were prepared in accordance with GAAP A“clean” audit opinion indicates that the auditors do believe that the financial statements present fairly the economic conditions of the firm. |
|
|
What are the advantages of the corporate entity form?
|
Advantages
Limited liability Ability to raise capital Ability to separate ownership from management Ease of transfer-ability of ownership |
|
|
What are the disadvantages of the corporate entity form?
|
Doubletaxation (corporate profits and dividends/capital gains) Paperwork and formalities |
