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MANGMT 1010: FINAL EXAM
Accounting |
collecting, analyzing and communicating financial information |
bookkeeping |
accountants keep records of taxes paid, income received and expenses incurred |
Accounting Information System |
procedure for identifying, measuring, recording and retaining financial information for later use |
Controller |
chief accounting officer |
Financial accounting |
concerned with external info users |
Managerial accounting |
serves internal users |
Certified public accountants |
offer accounting services to the public |
Audit |
examines a company's AIS to determine if financial reports are accurate
|
Generally Accepted Accounting Principle (GAAP) |
formulated by accounting boards to govern the content and form of financial reports |
Tax Services |
assistance with tax return preparation and tax planning |
Management Advisory Services |
services provided by an accounting firm. Include: financial planning, planning corporate merger, production scheduling and AIS design |
Core competencies |
unique combination of skills, technology and knowledge |
Private accountants |
most are management accountants who support managers in various activities |
Certified accounting |
recognizes accountants who have met experience and examination requirements |
Forensic accounting |
the use of accounting for legal purposes |
Certified fraud examiners |
awarded to those with expertise in fraud issues and allegations |
Sarbanes-Oxley Act of 2002 |
federal regulation designed to restore trust in corporate accounting practices |
Accounting Equation |
Assets= Liabilities + Owner's Equity |
Liabilities |
debt that a firm owes to and outside party |
Assets |
economic resource that benefits the firm or the the owner |
Owner's Equity |
the amount of money that an owner would receive if all the assets were sold and the liabilities were paid off |
Balance sheets |
snapshot of a company's financial statement |
Current assets |
cash and assets that can be converted into cash in less than a year |
Fixed assets |
assets with long-term value, ex: land, buildings and equipment |
Liquidity |
ease of converting assets into cash |
Intangible assets |
have monetary value in form of expected benefits |
Goodwill |
the amount paid for an existing business beyond the value of its other assets |
Current liabilities |
debts that must be paid within a year |
Accounts payable |
unpaid bills to suppliers |
Long-Term liabilities |
debts that are not due within a year, useless must be paid with interest |
Paid-in capital |
money invested by owners |
Retained Earnings |
net profits kept by a firm rather than being paid out to stockholders |
Income statement |
description of revenues and expenses that results in a firm's annual profit |
Revenues |
funds that come into a business from the sales of goods or services |
Cost of revenues |
cost of obtaining the revenues from other companies |
Cost of goods sold |
cost of obtaining materials to make products sold |
Gross profit |
quick to calculate profit, considers only revenues and cost of revenues |
Operating expenses |
resources that must flow out of a company if it wants to earn revenues |
Operating income |
compares gross profit from operations against operating expenses |
Net income |
subtracting income taxes from operating income |
Statement of cash flows |
shows the effect that on cash that come from three aspects of business: operating activities, investing activities and financing activities |
Cash flows from operation |
concerns main operating activite |
Cash flows from financing |
net cash from all financial activities |
Cash flows from investing |
net cash used in or provided by investing |
Revenue recognition |
formal recording and reporting of revenues |
Full disclosure |
GAAP requires financial statements to include interpretations and explanations of the numbers |
Solvency ratios |
used to estimate long term and short term risk |
Long-term risk |
calculated by dividing (debt minus total liabilities) by owner's equity (D-L)/OE |
Short-term risk |
measures liquidity and ability to pay immediate debts |
Current ratio |
Current assets/ Current liabilites |
Profitably ratios |
for measuring potential earnings |
Activity Ratio |
for evaluating management's use of assets |
Leverage |
the ability to make otherwise unaffordable investments |
Earnings per share |
net income/ number of shares outstanding= net earnings |
Code of professional conduct |
accountants must meet ethics standards to maintain certification |