Term
| Users of accounting information |
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Definition
| Managers, Stockholders, Employees, Creditors, Suppliers, Government Agencies (Internal Revenue Service [IRS], Securities and Exchange Commission) |
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Term
| Managerial vs. Financial Accounting |
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Definition
Managerial=information to internal stakeholders (managers of specific divisions or departments; info not available to general public)
Financial= information to external stakeholders (stockholders, creditors, government regulators; info IS available to general public) |
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Term
| Generally Accepted Accounting Principles (GAAP) |
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Definition
| adopted by those within the accounting profession as a set of standards used in the preparation of financial statements |
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Term
| Financial Accounting Standards Board (FASB) |
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Definition
| Private board of 5 members that establishes the GAAP used in the practice of financial accounting. Members required to sever all ties with any firms or institutions they served prior to joining the board. |
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Term
| FASB top priorities in upholding GAAP (4) |
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Definition
| Relevant, Reliable, Consistent, Comparable |
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Term
| 3 Basic Financial Statements |
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Definition
| balance sheet, income statement, and statement of cash flows |
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Term
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Definition
| Financial statement that reports the financial position of a firm by identifying and reporting the value of the firm's assets, liabilities, and owner's equity (at a specific point in time). |
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Term
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Definition
Found in a balance sheet;
Assets = Liabilities + Owner's Equity |
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Term
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Definition
resources owned by a firm;
usually classified into two major categories: Current Assets (cash and assets the firm expects to use up or convert into cash within a year) and Property, Plant and Equipment (land, buildings, machinery, equipment, and long-term assets) |
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Term
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Definition
claims that outsiders have against a firm's assets;
two broad categories: Current Liabilities (debts that come due within a year of the date on the balance sheet [wages]) and Long-term Liabilities (debts that don't come due until more than a year after date on balance sheet) |
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Term
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Definition
claims a firm's owners have against their company's assets;
Common and Retained (earnings reinvested in company rather than paid to owners) |
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Term
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Definition
| reports revenues, expenses, and net income that resulted from a firm's operations over an accounting period (over a given period of time) |
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Term
| income statement organization (equation) |
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Definition
| Revenue - Expenses = Net Income |
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Term
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Definition
| increase in the amount of cash and other assets the firm earns in a given time period as the result of its business activities |
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Term
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Definition
| the cash a firm spends, or other assets it uses up , to carry out the business activities necessary to generate its revenue |
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Term
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Definition
| difference between the firm's revenue and its cost of goods sold |
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Term
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Definition
| difference between gross profit and operating expenses |
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Term
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Definition
| profit or loss the firm earns in the time period covered by the income statement; "bottom line" of income statement |
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Term
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Definition
| Financial statement that identifies a firm's sources and uses of cash in a given accounting period (how and why the firm's cash position changed) |
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Term
| 3 activities covered in statement of cash flows |
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Definition
| operating activities, investing activities, financing activities |
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Term
| statement of cash flows equation |
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Definition
| operating cash flows (related to producing and selling) + investing cash flows (cash flows from the purchase and sale of long-term assets) + financing cash flows (cash flows related to long-term financing activities) = Total Cash Flow |
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Term
| Sarbanes-Oxley Act of 2002 |
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Definition
| Law creating the Public Company Accounting Oversight Board (PCAOB) and containing provisions to improve external auditing procedures; also bans relationships between CPA firms and the companies they audit. |
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Term
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Definition
| using comparative statements to identify changes in key account values over time |
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Term
| activity-based costing (ABC) |
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Definition
| aids managerial accountants in allocating costs; assigns product costs based on the links between activities that drive costs and the production of specific products |
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Term
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Definition
| tool used by managerial accountants evaluating the financial impact of different alternatives in a decision-making situation to determine whether a firm should: make parts and components itself, or buy them from suppliers; repair its existing equipment or buy new equipment; eliminate or sell off an existing product line |
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Term
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Definition
| tool in developing of budgets for managerial accountants, explicitly shows how firms will acquire and use the resources it needs to achieve its goals over a specific time period |
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Term
| two different approaches to budget preparation |
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Definition
| top-down budgeting (top management preparing budget with little or no input from middle and supervisory managers) and bottom-up or participatory budgeting (allowing middle and supervisory managers to actively participate in budget creating) |
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Term
| Two broad classes of budget documents |
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Definition
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Term
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Definition
communicate an organization's sales and production goals and the resources needed to achieve these goals;
starts with sales budget ends with budgeted income statement (expected net income) |
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Term
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Definition
focus on firm's financial goals and identify the resources needed to achieve those goals;
includes cash budget and capital expenditure budget |
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Term
| brings together all documents in the operating and financial budgets into a unified whole |
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Definition
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Term
| Four categories of financial ratios |
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Definition
| liquidity ratios, asset management ratios, leverage ratios, profitability ratios |
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Term
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Definition
| current ratio, which tells liquidity and how quickly you can pay short term liabilities |
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Term
| asset management ratios include |
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Definition
| inventory turnover ratio, can indicate a firm's products are moving quickly |
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Term
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Definition
| debt-to-equity ratio, determines how much a company depends on debt to get along |
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Term
| profitability ratio includes |
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Definition
| return-on-equity, which measures the income earned per dollar invested by stockholders. |
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