Chapter 14 Flashcards
(16 cards)
Keep track of financial events through the recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions.
Purpose of Accounting
buying and selling of goods and services, paying employees, and using supplies
Accounting Cycle
Indicate a firm’s financial health and stability and are key factors in management decision making. Summary of all transactions occurring over a particular period of time.
Financial Statement
Balance sheet, income statement, statement of cash flows.
What are the key financial statements of a business?
any business activity that results in a direct effect on the financial status and financial statements of the business.
Accounting Transactions
Sales in cash and credit to customers
Receipt of cash from a customer by sending an invoice
Ex. of accounting transaction
Requires two entries in the journal and ledgers for each transaction.
Double entry bookkeeping
Is used to keep all information about a single account in one place.
Ledger
A summary of all the financial data in the account ledgers that ensures the figures are correct and balanced.
Trial Balance
Assets are listed on the balance sheet in order of this.
Liquidity
Economic resources (things of value) owned by a firm; can be tangible or intangible
def. of Assets
Productive, tangible items such as equipment, buildings, land, furniture, and motor vehicles that help generate income.Intangible items with value like patents, trademarks, copyrights, and goodwill.
What is an Asset specifically…
What the business owes to others (debts)
Liabilities
Assets= Liabilities + owner’s equity
Accounting Equation
Depreciation
Depreciation
An evaluation and unbiased opinion about the accuracy of a company’s financial statements.
Independent Audit
