Accounting and Financial Systems

A set of flashcards covering key concepts from accounting and financial statements that are essential for exam preparation.

What is the purpose of accounting?

To provide stakeholders with financial information to make informed decisions.

What are the three types of accounting?

Financial accounting, managerial accounting, and forensic accounting.

What does the balance sheet show?

Assets, liabilities, and owner's equity at a specific point in time.

What summarizes revenues and expenses over a period?

The income statement.

What does the statement of cash flows detail?

Cash inflows and outflows from operating, investing, and financing activities.

What does GAAP stand for?

Generally Accepted Accounting Principles.

What are assets?

Resources owned by a company.

What are liabilities?

Obligations owed to outsiders.

What is owner's equity?

Owner's claims after liabilities are settled.

What are the functions of money?

Medium of exchange, measure of value, and store of value.

What characteristic of money ensures it can be divided?

Divisibility.

What type of financial institution focuses on residential mortgages?

Savings and loan associations.

What is the purpose of the Federal Reserve System?

To regulate the U.S. monetary and financial system.

What is a key tool of the Federal Reserve?

Reserve requirements, discount rate, or open market operations.

What does EFT stand for?

Electronic Funds Transfer.

What is the objective of financial management?

To maximize the firm's value and ensure financial stability.

What is cash flow management?

Monitoring cash inflows and outflows.

What is working capital management?

Managing short-term assets and liabilities to ensure liquidity.

What differentiates the primary market from the secondary market?

New securities are issued in the primary market, while existing securities are traded in the secondary market.

What are bonds?

Debt investments where an investor loans money to an entity.

What is an ETF?

Exchange-Traded Fund, a marketable security that tracks an index.