• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

Card Range To Study



Play button


Play button




Click to flip

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;

30 Cards in this Set

  • Front
  • Back
the measuring, classifying, analyzing, and communicating of financial information to help people inside and outside a company make good financial decisions.
the recording of a firm's financial transactions
Inside users of accounting
managers: need it to make plans and to guide the firm

employees: use it to see if the firm is profitable, if they'll keep their jobs, and if retirement accounts are healthy.

Outside users of accounting
stockholders: need the info to see how well the firm is doing and whether it is profitable

lenders: banks and similar institutions need it to evaluate the company's financial health and credit rating

suppliers: vendors need this data

govt agencies: need info to ensure tax revenues are collected.

managerial accounting
preparing accounting information and analyses for managers and other decision makers inside an organization

financial accounting
preparing accounting information and analyses for people outside the organization such as stockholders, creditors, lenders, etc.
Private accountants
in house accountants working for a single organization
two types of private accountants
CMA: a type of private accountant, they have passed a two day examination held by the institute of management accountants, that tests their knowledge of managerial accounting and business

CIA: a type of private accountant that holds a bachelors degree, two years of internal auditing experience, and passed a test given by the institute of internal auditors

formal evaluation of a client's financial records to determine their fairness and reliability.
public accountants
provide accounting services to clients on a fee basis. many are licensed as Certified public accountants, or CPAS.

CPA: met certain requirements for education and experience and have passed a series of examinations established by the american institute of certified public accountants.

Types of public accountants
external auditors: public accountants who audit

tax accountants: trained in tax law, concentrates on preparing tax returns and doing tax planning.

management advisory services: specialized accounting services that CPA's offer business managers to resolve different kinds of problems

not for profit accountants
work for governments and nonprofit organizations, concerned with efficiency, and not profits.
two types of not for profit accountants
government accountants: determine where tax money goes

forensic accountants: investigate suspected crimes within the field of finance, such as fraud.

Generally Accepted Accounting Principles (GAAP)
a set of accounting standards used in preparation of financial statements to ensure that they are relevant, reliable, consistent, and comparable.
The six steps of the accounting process
1. collect: find and sort records of business transactions

2. record: put daily transactions in journals, using double entry bookkeeping

3. classify: put journal entries in categories in a ledger

4.summarize: test ledger data accuracy by doing a trial balance

5. report: issue financial statements

6.analyze: assess the firms financial condition using ratio analysis

a record book or part of a computer program containing the daily record of the firm's transactions
a specialized record book or computer program that contains summaries of all journal transactions, accumulated into specific categories
trial balance
making a summary of all the data in the ledgers to see if the figures are accurate, or balanced
three types of financial statements
1. balance sheets- reports a firm's financial condition at a given time by showing its assets, liabilities, and owner's equity

2. income statements- shows a firm's revenues and expenses for a particular time period and the resulting profit or loss

3. statements of cash flows- reports over a period of time, the firms cash receipts

ratio analysis
uses one of a number of different ratios- such as liquidity, activity, debt to owner's equity, and profitability- to evaluate variables in a financial statement
liquidity ratios
measure a firms ability to meet its short term obligations when they become due.

current ratio and acid test ratio

current ratio
current ratio= current assets/ current liabilities
acid test ratio
acid test ratio= cash+marketable securities + receivables /current liabilities
activity ratios
used to evaluate how well management uses a firms assets to generate revenue
debt to owner's equity ratios
measures of the extent to which a company uses debt, such as bank loans to finance its operations
debt to owners equity ratio
total liabilities/owner's equity
profitability ratios
used to measure how well profits are doing in relation to the firms sales, assets or owners equity.

return on sales,return on assets, return on owner's equity

return on sales formula
net income/net sales
return on assets formula
net income/total assets
return on owner's equity formula
net income/owner's equity