Chapter 1: Introduction to Accounting

accounting

the process of identifying, measuring, recording, and communicating economic transactions.

bookkeeping

the recording of all financial transactions undertaken by an individual or organization

accounting system

the system designed to record the accounting transactions and events of a business and account for them in a way that complies with its policies and procedures.

accounting system

The basic elements are concerned with the collecting, recording, evaluating, and reporting transactions and events.

accountant

one that keeps, audits, and inspects the financial records of individuals or business concerns and prepares financial and tax reports

bookkeeper

a person employed to keep the books of account for a business.

bookkeeper

A _____ is responsible for ensuring that all transactions are recorded in the correct daybook, suppliers ledger, customer ledger and general ledger.

bookkeeper

An accountant may prepare the profit and loss statement and balance sheet using the trial balance and ledgers prepared by the _____.

bookkeeper

The _____ brings the books to the trial balance stage.

business entity

the unit for which accounting records are maintained and for which financial statements are prepared.

controller

the top managerial and financial accountant.

controller

The _____ supervises the accounting department and assists management in interpreting and utilizing managerial accounting information

creditors

those to whom an organization or an individual owes money. The balance on the creditors’ ledger control account is included in the balance sheet

financial accounting

the branch of accounting concerned with classifying, measuring, and recording the transactions of a business.

financial accounting

_____ is primarily concerned with providing a true and fair view of the activities of a business to parties external to it

managerial accounting

the branch of accounting which is mainly concerned with providing information helpful to managers running a business.

internal users

the whole staff of the company who is in charge of planning, maintaining, and supervising its financial activity

external users

those groups of individuals who are not directly concerned with the day to day operations of the entity, but who are indirectly related to it (owners, lenders, suppliers, potential investors and creditors, employees, taxing authorities etc.).

governmental accounting

used by government agencies, usually unprofitable organizations, but which also need to record financial information

private accountant

an accountant who works in private industry and is employed by a single enterprise.

public accountant

an independent professional person who offers accounting services to clients for a fee.

accountancy

is the theory of keeping financial records

accounting

refers to the activity of keeping financial records

account

is a record of money received and spent

accountant

is a person who keeps and works with financial records

accounting information

Managers and owners of both large and small profit-making organizations use _____ to answer important questions. Are profits sufficient? Should selling prices be increased or decreased? How many workers should be employed? etc.

making decisions

Persons responsible for non-profit organizations also need accounting information as the basis for _____

non-profit organization

churches, social clubs, and city governments, must keep spending within money available.

owners

Business managers and _____ need good financial information to make good business decisions

accounting records

Orderly records of a business of financial activities

bankruptcy

Inaccurate accounting records often contribute to business failure and _____

business decisions

Failure to understand accounting information can result in poor _____ for either profit or non-profit businesses and organizations

accounting training

helps managers and owners make better business decisions

assets

this is name for buildings machinery, money in the bank and money owned by customers

depreciation

The loss of value of the things in number one

loan

Money which is borrowed

interest

The extra money a company or person pays for borrowing money

capital

The total sum of money which is supplied by the owners of a company to set it up

drawings

Cash or goods which the owner takes from the company for his own private use

shares

These are bought by people wishing to invest in the company

goodwill

The extra amount which is paid for a company above the value of its assets

acquisition

The purchase of another company

audit

An official examination of the accounts

budget

A financial plan for the future

balance sheet

A statement of the financial position of the company

ledgers

The official books for keeping accounts

discount

A reduction in the price which is offered to customers

creditor

This company has supplied goods but has not received any money for them yet

stocks

Goods which has the company has available to sell

debtors

Customers who have received goods but not paid for them yet

balance

This is the name of the difference between the credit and debit side of a account

profit

Companies make this when they sell their goods for more than it costs

loss

Companies make this when they sell their goods for less than it cost