BUSN Chapter 8: Accounting

Flashcards for BUSN Chapter 8: Accounting

Who needs accounting information?

Managers, Shareholders, Employees, Creditors, Suppliers, Government Agencies

What are the different types of accountants?

Private accountants, Internal auditors, Public accountants, Government accountants, Forensic accountants

What is Financial accounting?

The branch of accounting that addresses the needs of external stakeholders; includes financial statements to provide broad information

What are International Financial Reporting Standards (IFRS)?

Accounting standards that are used in the preparation of financial statements to ensure that financial statements are Relevant, Reliable, Consistent, and Comparable

What are the three basic financial statements?

Balance sheet, Income statement, Statement of cash flows

What does a Balance sheet do?

Summarizes a firm’s financial position at a specific point in time

What is the accounting equation?

Assets = Liabilities + Owner’s equity

What is the purpose of an Income statement?

Summarizes a firm’s operations over a given period of time in terms of profit and loss

How is net income calculated?

Revenue – Expenses = Net income

What does the Statement of Cash Flows track?

Cash flowing into and out of the firm through Operations, Investing, and Financing

What are the three categories of cash flows?

Operating, Investing, Financing

What does the Statement of retained earnings do?

Reports how retained earnings have changed

What does the Shareholders’ equity statement do?

Reports how net income and dividends affect retained earnings

What are the key components to view with financial statements?

Auditor’s report, Notes to financial statements, Comparative statements

What type of opinion will an auditor issue?

An unqualified, qualified, or adverse opinion

What is horizontal analysis?

Uses comparative statements to identify changes in key accounts’ values over time

What is Managerial accounting?

Provides reports and analysis to managers to help them make informed business decisions

What are the responsibilities of managerial accountants?

Determining product costs, Performing incremental analysis, Developing budgets

What are Direct costs?

Can be directly traced to production.

What are Indirect costs?

Are the result of general operations.

What is Activity-based costing (ABC)?

A technique used to assign product costs based on links between activities that drive costs and the production of specific goods

What is Incremental analysis?

Evaluates the financial impact of different alternatives in a decision-making situation

What is Budgeting?

Outlines how resources will be used to meet goals

What do Operating budgets do?

Identify sales and production goals

What do Financial budgets do?

Focus on the firm’s financial objectives

What is Top-down budgeting?

Top management prepares the budget with little or no input from middle and supervisory managers

What is Bottom-up or participatory budgeting?

Allows middle and supervisory managers to actively participate in the creation of the budget

What is a Master budget?

Brings together all of the budgets to represent the overall plan