CH. 15 voca

Accounting

System for collecting, analyzing, and communicating financial information

Bookkeeping

Recording of accounting transactions

Accounting Information System (AIS)

Organized procedure for identifying, measuring, recording, and retaining financial information

Financial Accounting

Concerned with external users of financial information

Managerial Accounting

Serves internal users of financial information

Controller

Manages all accounting activities in a firm

Certified Public Accountant (CPA)

State-licensed accountant offering services to the public

Audit

Examination of a company's accounting system for reliable financial reports

Generally Accepted Accounting Principles (GAAP)

Guidelines governing content and form of financial reports

Tax Services

CPA assistance for tax preparation and planning

Management Advisory Services

CPA assistance in financial planning and information systems design

Core Competencies for Accounting

Skills, technology, and knowledge needed for CPAs

Forensic Accounting

Accounting for legal purposes

Certified Fraud Examiner (CFE)

Professional designation for forensic accounting qualifications

Sarbanes-Oxley Act of 2002 (Sarbox or Sox)

Federal regulations to restore public trust in accounting practices

National Accounting Oversight Board

Establishes ethics standards for CPA firms

CEO and CFO Certification

Certify company's financial statements as true, fair, and accurate

Code of Ethics Disclosure

Requirement for companies to disclose adoption of ethics code for financial officers

SEC Review

Regular review of corporation's financial statements by SEC

Criminal Penalties for Falsification

Imposes penalties for falsifying, destroying, or altering records

Shareholder Fraud Penalties

Imposes penalties for defrauding shareholders

Mail and Wire Fraud Penalties

Increases penalties for mail and wire fraud

Corporate Officers' Liability

Establishes criminal liability for failure to certify financial reports

Accounting Equation

Assets = Liabilities + Owners' Equity; used to balance financial data

Asset

Economic resource benefiting a firm or individual

Liability

Debt owed by a firm to an outside entity

Owners' Equity

Money owners would receive after selling assets and paying liabilities

Financial Statement

Report summarizing a company's financial status

Balance Sheet

Details assets, liabilities, and owners' equity

Current Asset

Asset convertible to cash within a year

Liquidity

Ease of converting asset to cash

Fixed Asset

Long-term valuable asset like land or equipment

Depreciation

Cost distribution of asset over its useful life

Current Liability

Debt due within a year

Accounts Payable

Bills owed to suppliers

Long-Term Liability

Debt not due for at least a year

Retained Earnings

Firm's earnings kept for use rather than dividends

Intangible Asset

Nonphysical asset with economic value

Goodwill

Amount paid for a business above its asset value

Income Statement

Lists annual revenues and expenses for profit calculation

Revenues

Funds from goods or services sale

Cost of Goods Sold

Costs for materials in products sold

Operating Expenses

Costs in producing goods or services

Gross Profit

Profit from revenues minus cost of revenues

Operating Income

Gross profit minus operating expenses

Net Income

Gross profit minus expenses and taxes

Statement of Cash Flows

Describes yearly cash receipts and payments