ACCT 2301:Chapter 1
37 Cards in this Set
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Accounting is a system that...
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identifies
records
communicates
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Accounting communicates information that is...
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relevant
reliable
comparable
about an organization's business activities
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Accounting Activities
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identifying
recording
communicating
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External Users of Accounting Information
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lenders
shareholders
governments
consumer groups
external auditors
customers
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Internal Users of Accounting Information
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managers
officers
internal auditors
sales staff
budget officers
controllers
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Financial accounting provides external users with....
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financial statements
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Managerial accounting provides needs for ________ decision makers.
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internal
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Managerial accounting for internal decision makers provides...
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documents such as budgets and cost analyses
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What does GAAP stand for?
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Generally Accepted Accounting Principles
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Principles of GAP
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relevant information
reliable information
comparable information
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What is the name of the government agency SEC?
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Securities and Exchange Commission
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What is FASB?
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financial accounting standards board
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What does the Financial Accounting Standards Board (FASB) do?
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creates the rules
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What does SEC do?
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set the rules
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Matching principle (expense recognition)
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prescribes that a company must record its expenses incurred to generate revenue
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Sarbanes-Oxley Act (SOX)
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cleaned up inconsistencies
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SOX
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Sarbanes-Oxley Act, Requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.
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Dodd-Frank Act (2010)
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1. Promote accountability and transparency of financial system
2. end "too big to fail" institutions
3. end taxpayer bailouts of corporations
4. protect consumers from abusive financial practices
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Assets =
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liabilities + equity
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What are assests?
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resources owned or controlled by a company
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______ result from creditors' claims on assets.
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liabilites
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Equity
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owner's claim on assets
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accounts receivable
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money people owe you
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notes receivable
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money lent to someone; owed to you
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Accounts payable
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WE owe money
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Notes payable
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Money we borrow; owed
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Taxes payable
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For federal, state or local taxes.
Govt is your creditor.
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Contributed capital
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money contributed by owners
i.e. stock
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dividends
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distribution of a company's earnings to its stockholders as a return on their investment (NOT an expense)
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Retained earnings
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company earnings retained
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Retained Earnings include....
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dividends
revenues
expenses
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Expanded Accounting Equation
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contributed captial - dividends + revenues - expenses
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Rules of transaction analysis
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1. Every transaction affects at least two accounts
2. The accounting equation must remain in balance after each transaction
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Income Statement
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describes a company;s revenues and expenses along with the resulting net income or loss over a PERIOD OF TIME due to earnings activities
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income statement equation
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revenues
- expenses
__________
#NAME?
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formula for retained earnings statement
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beginning retained earnings + net income - dividends = ending retained earnings
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balance sheet
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describes a company's financial position at a point in time
Assets= Liabilites + Equity
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ACCT 2301:Chapter 1