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5 Cards in this Set
- Front
- Back
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Accounting |
Basic language of business Art of measuring, communicating, and interpreting financial activity |
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Accounting Functions |
1. Keep track of monetary transactions 2. Report its financial transactions to shareholders and various federal, state, and local taxing authorities 3. Control expenses 4. Monitor and safeguard company assets 5. Make decisions and plan for future |
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Accounting Process |
1st Phase: recording financial transactions. 2nd Phase: posting transactions, Journal and General Lwdger. 3rd Phase: Prepare Financial Statements describing company's financial position: its cash flow, profits, loses, assets, liabilities, and net worth STATEMENTS enable mgrs. Shareholders, bankers, etc. To MAKE DECISIONS on future of company |
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Accounting and FASB |
Accounting Standards are not set by law but by private organizations. FASB: Financial Accounting Standards Board. Sts the Standards for financial transactions |
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GAAP Generally Accepted Accounting Principles |
1. Business Entity Concept. Every organization that operates independently (an entity) is treated as a business. No personal transactions. Only entity's financial 2. Continuing Concern: Concept Assumes a business entity will continue to operate indefinitely as a business. Value assets at the cost of the assets. If business for sale is not longer continuing concept and value assets at fair market value. 3. Time period concept: E/organization must determine its own accounting period based on type of business engagement. Calendar vs fiscal 4. Cost principle. Because organizations are assumed to continue as going concers. All goods and purchases are recorded at the cost of acquiring them. Once valued an asset=cost value - depreciation Each Organization must determined its own accounting period based on type of business engagement. Calendar or fiscal yr. 5. Objectivity principle transactions must be recorded objectively. No personal opinions nor emotions are part of recorded transactions 6. Matching Principle: Expenses, revenue, and liabilities must be matched to the accounting period in which they were earned. Under matching principle, transactions must be recorded before any money changes hands. This principle allows a comparison between different organizations. Financial statements. 7. Realization Principle governs the record of Revenue: income received for goods and services provided by an organization. Revenue is recognized (or realized) and reported when earned, which is during the accounting period when goods have been transfered or service provided: cash recognized at fair market value. 8. Consistency Principle transactions must be recorded on a consistent manner based in the particular accounting method, principle and period.
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