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46 Cards in this Set

  • Front
  • Back
What is Accounting
Counting Money
Accounting for Money
Why Accounting
Good business tool for making business decisions
Two broad categories of accounting information users are
Internal to the business entity, external to the business entity.
Two types of accounting for the type of internal and external users of accounting information
Financial Accounting - Externals

Managerial Accounting - Internals
Most important thing about accounting?
Shared vocabulary and shared assumptions. Apples are apples and oranges are oranges.

Because we must make informed shared decisions
What two bodies oversee accounting standards
FASB - Financial Accounting Standard Boards

GAAP - Generally accepted Accounting Principles
What are the 4 type of general financial statements.
1) Cash Flow
2) Income Statement
3) Balance Sheet
4) Changes in Equity
What is the difference between Cash Accounting and
Accural Accounting.
Record of Sale:

1) When the cash is received
2) When the goods are shipped (Accural - a cruise SHIP)
Name 10 elements that comprise financial statements
gains, losses
net income, distributions
revenue, expenses
contributed capital
assets = liabilities + equity
Income Statement
A given company
for a given period of time
inputs this much revenue
and outputs this much expenses
resulting in New Income or Change in Next Assets for the given period of time.
Assets increases are called:
Asset decreases are called:
Difference between revenues and expenses are called:
Net Revenues (if positive)
Net Loss (if negative
Financial Statement:
Changes in Equity
For a given period, for a given entity, we have Contributed Capital and Retained Earnings.

Both have a beginning and ending balance and it is equal to the Total Equity that has changed.
Balance Sheet
Assets = Liabilities + Equity
Claims =
Claims = Liabilities + Equity
True or False

Total Claims are equal to Total Assets
True. Assets must have a source so they balance with claims.
What are some of the back office activites of accountants
cash inflows
cash payments
property records
What are some of the tax aspects that accountants work with?
Payroll Tax
Property Tax
Sales Tax
Income Tax
Can P&L be determined by the balance sheet?
No, look at the income statement
Accounts deal with the past
and predicting the future (future forcasts)
Assets are the economic resourses claimed by the business.
An accountant must determine how to allocate shared costs.
Assets = sources of assets
Accounts array and measure and calculate:
They also communicate the results to others
Income Statement = Revenue inflows - expense outflow
for a given entity, for a given time period.
Accounts design the internal control of the accounting systems
Statement of Cash Flow

summarizes the business cash inflow and outflow for a period
The Balance Sheet is commonly referred to as the
Statement of Financil Condition
In the balance sheet how are assets valued.
Assets are valued at their purchase price unless they have lost value.
Accounting Equation equals
asset = liabilities + owners equity.

(Owner equity can consist both of contributed capital and retained earnings)

The total wages and salaries earned by a employee during a period is called
Gross Wages
Accellerated Depreciation
A method of estimating of a item useful live and allocating that cost of a fixed asset over time. Acclellerated depreciation allocates greater amount to the the cost early in life and lower amount later in life.
Two Types of Depreciation
Accellerated Depreciation

Straightline Depreciation
Straightline Depreciation
Spreading the cost of a fixed asset in eqaual amounts to each year of its useful life. Depreciation is the same amount every year by this method.
Why do we depreciate the value of something?
A method of estimating a item's useful live and allocating that cost (expense) of a asset over time.
Accounts Payable
short term liabilities on the amount owe to vendors or suppliers for parts, materials, services. Usually not interet burden unless not paid on time
Accounts Receivable
Short term assets... amount owed to the entity business ecause of parts, products materials or services. Usually not interest bearing unless not paid on time.
General Ledger
huge database capturing all transactions in a double entry format.
Collect things such as:
type: debit or credit
purchase order number
invoice number
payment date, payment method,
budget code,
account title and code.
What are the three financial statements that summarize the general ledger?
Income Statement
Cash Flow
Balance Sheet
The income statement can also me called?
The P&L, the profit and loss statement and the earnings statement.
A cash flow statement is simalar to your...
Bank Account Statement
The bottom line on the income statement is called?
Net Income

The difference between your assets - liabilities in your personal networth.
FAQ: for businesses Think Lean and Mean
Make productive use of our resources in a way that generates profits.
loan convenants are
clauses of the loan agreement that are promises you make to the bank so they will loan you money
Who owns the company?
With Debt the Lenders
With Stock, the Shareholders
With Retained earnings... the business owns the business.
Powers of the shareholders are...
1) They can vote on
2) articles of incorporation
3) board of directors who choose the executive management
Working capital = current assets - current liabilities.
* things that can with a high probality turned to cash.
The best business in the world is where we put a little in and get a whole lot out. For example wouldn't it be great if we could invest 10 cents and get $5 dollars out.
selling your accounts receivable to a bank (factoring agent) to get cash (reduced) on the dollar.

Fixed Costs
Variable Costs
Semi-variables Costs
Fixed costs stay constant regardless of regardless of the variables such as number of units produced.
Direct Costs are
costs that you can logically trace to the creation of the product.

Indirect costs include marketing, selling and designing the product.