Accounting Chapter 1 Key Terms

Vocabulary flashcards covering the key terms, business ownership structures, activities, and accounting roles defined in Chapter 1.

accountant

Designs the accounting information system and focuses on analyzing and interpreting information.

accounting

A system of gathering financial information about a business and reporting this information to users.

accounting clerk

Records, sorts, and files accounting information.

accounting information systems

Accountants in this area design and implement manual and computerized accounting systems.

Accounting Standards Update

A standard issued by the Financial Accounting Standards Board. These standards must be followed when preparing financial statements. The updates are included in the FASB Accounting Standards Codification.

analyzing

Looking at events that have taken place and thinking about how they affect the business.

auditing

Reviewing and testing to be certain that proper accounting policies and practices have been followed.

bookkeeper

Generally supervises the work of accounting clerks, helps with daily accounting work, and summarizes accounting information.

budgeting

The process in which accountants help managers develop a financial plan.

Certified Fraud Examiner (CFE)

A forensic accountant who has passed the exam offered by the Association of Certified Fraud Examiners.

Certified Internal Auditor (CIA)

An internal auditor who has achieved professional recognition by passing the uniform examination offered by the Institute of Internal Auditors.

Certified Management Accountant (CMA)

An accountant who has passed an examination offered by the Institute of Management Accountants.

Certified Public Accountant (CPA)

A public accountant who has met certain educational and experience requirements and has passed an examination prepared by the American Institute of Certified Public Accountants.

classifying

Sorting and grouping similar items together rather than merely keeping a simple, diary-like record of numerous events.

Controller

The accountant who oversees the entire accounting process and is the principal accounting officer of a company.

corporation

A type of ownership structure in which stockholders own the business. The owners' risk is usually limited to their initial investment, and they usually have very little influence on the business decisions.

cost accounting

Determining the cost of producing specific products or providing services and analyzing for cost effectiveness.

Exposure Draft

This document explains the rules that FASB believes firms should follow in accounting for a particular event. Based on the responses to the Exposure Draft, the Board will decide if any changes are necessary before issuing a final standard.

financial accounting

Includes preparing various reports and financial statements and analyzing operating, investing, and financing decisions.

Financial Accounting Standards Board Accounting Standards Codification

This Codification is an electronic database that provides one authoritative source for the standards which must be followed by U.S. companies.

forensic accounting

A specialized field that combines fraud detection, fraud prevention, litigation support, expert witnessing, business valuations, and other investigative activities.

generally accepted accounting principles (GAAP)

Procedures and guidelines developed by the Financial Accounting Standards Board to be followed in the accounting and reporting process.

internal auditing

Reviewing the operating and accounting control procedures adopted by management to make sure the controls are adequate and being followed; assuring that accurate and timely information is provided.

interpreting

Deciding the meaning and importance of the information in various reports.

management advisory services

Providing advice to businesses on a wide variety of managerial issues.

manufacturing business

A business that makes a product to sell.

merchandising business

A business that buys products to sell.

para-accountant

A paraprofessional who provides many accounting, auditing, or tax services under the direct supervision of an accountant.

partnership

A type of ownership structure in which more than one person owns the business.

Preliminary Views

The first document issued by FASB when developing an accounting standard. This document identifies the pros and cons of various accounting treatments for an event and invites others to comment.

public hearing

Following the issuance of a discussion memorandum, public meetings are often held by FASB to gather opinions on the accounting issue.

recording

Entering financial information about events affecting the company into the accounting system.

reporting

Telling the results of the financial information.

Sarbanes-Oxley Act (SOX)

An act passed by Congress to help improve reporting practices of public companies.

service business

A business that provides a service.

sole proprietorship

A type of ownership structure in which one person owns the business.

summarizing

Bringing the various items of information together to determine a result.

tax accounting

Services focused on tax planning, preparing tax returns, and dealing with the Internal Revenue Service and other governmental agencies.