Financial Accounting

Accounting

A system for providing quantitative, financial information about economic entities that is useful for making sounds economic decisions.

Accounting cycle

The procedure for analyzing, recording, summarizing, and reporting the transactions of a business.

Accounting system

The procedures and processes used by a business to analyze transactions, handle routine bookkeeping tasks, and structure information so it can be used to evaluate the performance and health of the business.

AICPA

The national organization of CPA’s in the United States

Annual report

A document that summarizes the results of operations and financial status of a company for the past year and outlines future plans.

Financial accounting

The area of accounting concerned with reporting financial information to interested external parties.

Financial accounting standards board (FASB)

The private organization responsible for establishing standars for financial accounting and reporting in the united states.

Financial Statements

Reports such as balance sheet, income statement, and statement of cash flows, which summarize the fanancial status and results of operations of a business entity.

Generally accepted accounting principles ( GAAP)

Authoritative guidelines established by the FASB that define accounting practice at a particular time.

Interest

The payment (cost) for the use of money.

Internal revenue services (IRS)

A government agency that prescribes the rules and regulations that govern the collection of tax revenues in the United States

International accounting standars board (IASB)

A committee formed to develop international accounting standars.

Managerial accounting

The area of accounting concerned with providing services efficiently and effectively.

Accounting Equation

Equation that expresses the the relationship between assets (resources), liabilities (obligations), and owners equity. (Assets = liabilities+ owners equity)

Assets

Economic resources that are owned or controlled by a company

Audit report

Report that expresses an opinion about weather statements fairly present a companys financial position, operating results and cash flows.

Balance sheet

financial statement that reports a company’s assets, liabilities, and owners equity at a particular date.

Capital Stock

The portion of stockholders equity that represents investment by owners in exchange for shares of stock.

Cash Inflows

Any current or expected revenues or savings directly associated with an investment.

Cash Outflows

The initial cost and other expected outlays associated with an investment.

Dividends

Distributions to the owners (stockholders), if the business is a corporation

Earnings per share (EPS)

The amount of net income (earnings) related to each share of stock computed by dividing net income by the number of shares of stock outstanding during this period.

Entity

An organizational unit (person, partnership, or corporation) for which accounting records are kept and about which accounting reports are prepared.

Gross margin

The difference between sales and cost of goods sold

Gross profit

The difference between sales and cost of goods sold

Income statement

The financial statement that reports the amount of net income earned by a company during a period.

Liquid assets

Assets that are in the form of cash or can be easily converted into cash.

Net assets

The owners equity of a business. Equal to total assets minus total liabilities.

Net income

A line on the income statement that reports a company’s operating income minus interest expense and taxes.

Primary financial statements

The balance sheet, income statement, and statement of cash flows.