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Accounting Overview Flashcards

Accounting Overview Flashcards
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Owner's equity
What a person puts into their own company out of their personal funds. It is a personal investment into the business.
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Liabilities

Things the company must pay or what they owe.

Mortgage on a building or rent for warehouse space are examples.

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Assets

Things that benefit the company. Things the company owns that have value.

Cash, bank accounts, property, merchandise, etc.

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Accounting
Collection, organization, and interpretation of financial data.
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Sarbanes-Oxley Act of 2002

Act passed responding to the Enron scandal. States:


*Top-level executives accountable for financial information accuracy


*Records that must be kept


*Time to keep records


* Noncompliance penalties

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The benefit of using technology in accounting.

Technology is anything that makes work easier, including accounting.

In accounting this is seen through increased ease of transporting (portability) financial records in large quantities.

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The Cloud
Network of computer servers that offer users a virtual place to save and store information.
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Statement of retained earnings
External use of accounting that tells how much income is reinvested in the company
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Income Statement
External use of accounting that tells how much money a company brings in.
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Balance sheet
External use of accounting that tells the balance of the accounts (e.g. assets, liabilities, and owner's equity) a company has.
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Statement of cash flow
External use of accounting that shows revenue and cash flow out.
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Most common external user of accounting information
Investors
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External Users of Accounting Information

Anyone outside (or external to) the company

Investors

Creditors

Government

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26 cards in set

Flashcard Content Overview

These flashcards will test the students knowledge of laws and ethical practices pertaining to accounting as well as basic accounting principles. Students will study definitions and have a chance to put some of their knowledge into practice. These flashcards will prepare you for a general overview of Accounting.

Front
Back
External Users of Accounting Information

Anyone outside (or external to) the company

Investors

Creditors

Government

Most common external user of accounting information
Investors
Statement of cash flow
External use of accounting that shows revenue and cash flow out.
Balance sheet
External use of accounting that tells the balance of the accounts (e.g. assets, liabilities, and owner's equity) a company has.
Income Statement
External use of accounting that tells how much money a company brings in.
Statement of retained earnings
External use of accounting that tells how much income is reinvested in the company
The Cloud
Network of computer servers that offer users a virtual place to save and store information.
The benefit of using technology in accounting.

Technology is anything that makes work easier, including accounting.

In accounting this is seen through increased ease of transporting (portability) financial records in large quantities.

Sarbanes-Oxley Act of 2002

Act passed responding to the Enron scandal. States:


*Top-level executives accountable for financial information accuracy


*Records that must be kept


*Time to keep records


* Noncompliance penalties

Accounting
Collection, organization, and interpretation of financial data.
Assets

Things that benefit the company. Things the company owns that have value.

Cash, bank accounts, property, merchandise, etc.

Liabilities

Things the company must pay or what they owe.

Mortgage on a building or rent for warehouse space are examples.

Owner's equity
What a person puts into their own company out of their personal funds. It is a personal investment into the business.
To start a company, you buy equipment for $1000, invest $4,500 of your own money, and borrow $8,000. What are your assets, liabilities, and equity?

assets: 1000

liabilities: 8000

equity: 4500

How accounting relates to business
  • shows owner the amount of flow of their cash
  • gives info to investors and creditors for decision making
  • required for tax purposes
GAAP

Generally Accepted Accounting Principles

Created by the Committee on Accounting Procedure (CAP)

Comprises 10 Basic Principles of Accounting

Going concern principle
Intent to continue to operate.
Materiality Principle
How important a misstatement in accounting records is.
Full disclosure principle
Requirement for all relevant financial information to be reported.
Revenue Recognition Principle
How a business identifies income (or revenue). It must be reported on the statement during which it was earned.
Economic Entity Assumption
Separation of personal and business monies.
Monetary Unit Assumption
Accounting records only include activities with a monetary value.
Time Period Assumption
Time intervals for reporting business activities.
Conservatism
Requirement to record potential expenses and liabilities immediately, but potential revenue only after it has occurred.
Cost principle
What an item cost should be recorded on statements. Can't change it.
Matching Principle
Match income and expenses within time periods.

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