Accounting Flashcards
(30 cards)
What is an ECONOMIC ENTITY?
Unit that exists independently.
- e.g. Hospital Ángeles or McDonald’s
What information does accounting COLLECTS?
Economic events (💵 in and out)
How does the accounting information TRANSLATES?
Into accounting transactions.
How does the accounting information PROCESSES?
In a computer system.
How does the accounting information COMMUNICATES?
To decision makers
The accounting information system goes THRU FINANCIAL INFORMATION…
About the entity (what happen with the 💵)
What ACCOUNTANTS do?
Needs for financial information, whether the decision makers are:
- INSIDE or OUTSIDE a business or other economic entity.
Types of DECISION MAKERS
- MANAGEMENT: operational interest.
- DIRECT FINANCIAL INTEREST (outsider)
- INDIRECT FINANCIAL INTEREST (outsiders)
What does MANAGEMENT do?
A company meets its goals of profitability (earning more 💵 than what was spent) and liquidity (to be able to pay).
What does users with DIRECT FINANCIAL INTEREST do?
- Publish monthly financial statements to REPORT their success 🔝 in meeting goals of profitability and liquidity.
- Shows what happened in the PAST.
- Investors and creditors
What are CREDITORS?
Lend money or deliver goods and services before being paid.
- e.g. Coca Cola delivering products
What are INVESTORS?
Judge the prospects for a profitable investment.
- e.g. Buying stoks in a company
What does users with INDIRECT FINANCIAL INTEREST do?
- Tax authorities
- Regulatory agencies
MEXICAN regulatory agency
Comisión Nacional Bancaria y de Valores (CNBV)
Does all decision makers get the same type of financial information?
Depends on the decision needs.
Types of accounting systems
Characteristics about BUSINESS ECONOMIC EVENTS
- Result of a business activity
- Recorded in accounting through transactions (BOOKKEEPING)
- Measured through MONETARY units
- Affect the financial position
Types of BUSINESS ACTIVITY
- Commercial = exchange value 💵
- Operative = no exchange values 💵
What is BOOKKEEPING?
Process of recording financial transactions and keeping financial records
Why MONETARY units?
- Only common factor
- Capable to be compared
- Depends on the country in which the business resides
What is a SEPARATE ENTITY?
Consider only those events that affect that business
If transactions of a business are mixed up (owners and a business) the accounting information would…
Lose its usability
What is a TRANSACTION?
External event
2 or more companies mediating an economic benefit
What are SETTINGS?
Internal event
Decisions affecting the financial structure of the company
