Studied by 2 people
accounting
comprehensive information system for collecting, analyzing and communicating financial information
bookkeeping
recording accounting transactions
accounting information system
organized procedure for identifying, measuring, recording and retaining financial information for use in accounting statements and management reports
uses of accounting information
business managers, employees, unions, investors, creditors, tax authorities and government agencies
controller
individuals who manage all the firm's accounting activities
financial accounting system
process whereby interested groups are kept informed about the financial condition of a firm; focuses on firm as a whole
managerial accounting
internal procedures that alert managers to problems and aid them in planning and decision making
chartered professional accountant (CPA)
banner used to unify the accounting profession in canada; takes best practices from all three former designations
chartered accountant (CPA, CA)
individual who has met certain experience and education requirements; acts as outside account and typically does external financial reporting
certified general accountants (CPA, CGA)
individual who has completed an education program and passed a national exam; typically works in private industry
Certified management accountants (CPA, CMA)
individual who has completed a university degree, passed a national exam and completed a strategic leadership program; typically works on internal management accounting
audit
accountant's examination of a company's financial records to determine if it used proper procedures to prepare its financial reports
international financial reporting standards (IFRS)
standard accounting rules developed by the international accounting standards board (IASB) and used by publicly accountable enterprises and private government enterprises
forensic accountants
accountants who track down hidden funds in business firms; must get certified in financial forensics (CFF) to have the job
tax services
helping clients prepare tax returns and also tax planning
management consulting services
specialized accounting services to help managers resolve a variety of problems in finance, production scheduling and other areas
private accountants
accountant hired as a salaried employee to deal with a company's day-to-day accounting needs
accounting equation
assets = liabilities + owner's equity
asset
any economic resource that is expected to benefit a firm or an individual who owns it
liability
debt that the firm owes to an outside party
owner's equity
amount of money the owners would receive if they sold all the company's assets and paid allof its liabilities
double entry accounting system
used to record the dual effects of financial transactions
financial statements
any of several types of broad reports regarding a company's financial status; most often used in reference to balance sheets, income statement or statements of cash flows
balance sheets
type of financial statement that summarizes a firm's financial position on a particular date in terms of its assets, liabilities and owner's equity
current assets
cash and other assets that can be converted into cash within a year
liquidity
ease of converting an asset into cash
fixed assets
assets that have long-term use or value to the firm
depreciation
accounting method for distributing the cost of an asset over its useful life
intangible assets
non-physical assets that have economic value in the form of expected benefit
goodwill
amount paid for an existing business beyond the value of tis other assets
current liabilities
debts that must be paid within one year
accounts payable
amounts due from the firm to its suppliers for goods or services purchased on credit
long term liabilites
debt not due for at least one year; typically have to pay interest on
paid-in capital
any additional money invested in the firm by the owners
retained earnings
company's net profits less any dividend payments to shareholders
income statements
type of financial statement that describes a firm's revenues and expenses and indicates whether the firm has earned a profit or suffered a loss during a given period; revenues - expenses = profit
revenue
any money received by the firm as a result of selling a good or service or from other sources
revenue recognition
formal recording and reporting of revenues in the financial statements
matching principle
expenses will be matched with revenues to determine net income for an accounting period
cost of goods sold
all expenses directly involved in producing or selling a good or service during a given time period
gross profit
firm's revenues less its cost of goods sold
operating expenses
costs incurred by a firm other than those included in costs of goods sold
selling expenses
occurs from activities related to selling the firm's goods or services
general and administrative expenses
expenses related to the general management of the company
operating income
compares the gross profit from business operations against operating expenses
net income
a firm's gross profit less its operating expenses and income taxes
statement of cash flows
financial statement that describes a firm's generation and use of cash during a given period
cash flows from operations
cash transactions in buying and selling goods and services
cash flows from investing
net cash used in or provided by investing
cash flows from financing
reports net cash from all financing activites
budget
detailed statement of estimated receipts and expenditures for a future period of time
solvency ratios
ratios that estimate the financial risk that is evident in a company
short-term solvency ratios
financial ratio for measuring a company's ability to pay immediate debts
current ratio
ratio for measuring a company's ability to pay current debts out of current assets; divide current assets by current liabilites
debt-to-equity ratio
calculated by dividing total liabilities by owner's equity
leverage
using borrowed funds to make purchases, thus increasing user's purchasing power, potential rate of return and risk of loss
profitability ratios
measures of a firm's overall financial performance in terms of its likely profits
return on equity
net income divided by total owner's equity; shows net income earned for each dollar invested
return on sales
net income divided by sales revenue; profit generated from each dollar of sales revenue
earnings per shares
net income divided by number of shares of common stock outstanding; influences size of dividend a company can pay to its shareholders
activity ratios
measures how efficiently a firm uses its resources
inventory turnover ratio
cost of goods sold divided by average inventory; activity ratio that measures the average number of times inventory is sold and restocked during the year
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