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1

provides financial information about current operations and financial condition of a business to individuals, agencies, and organizations

purpose of accounting

2

users of accounting information

owners, managers, creditors, government agencies

3

system of gathering financial information about a business and reporting this information to users

accounting process

4

6 major steps of process

1. analyzing
2. recording
3. classifying
4. summarizing
5. reporting
6. interpreting

5

looking at events that have taken place; thinking about how these events have effected business

analyzing

6

entering financial information about events into an accounting system; information can be entered manually; most use computer

recording

7

sorting and grouping similar items together

classifying

8

bringing various items of information together; determines a result

summarizing

9

communicating results; communication in form of financial statements

reporting

10

deciding meaningful and importance of reported information; uses ratios and percentage analysis to explain how pieces of information relate to one another

interpreting

11

developed by financial account standards board, private standard setting body; provides concepts and guidelines to be followed during accounting process

generally accepted accounting principles

12

5 steps for adopting a standard

1. issue is placed on FASBs agenda
2. discussion memoradum is issued
3. public hearings are held around country
4. exposure draft issued
5. final statement of finacnial accouting standard is issued

13

owned by one person; assumes all risks for business personally; owner makes all business decisions

sole proprietorship

14

owned by more than one person; parterners assume all risks for business personally; share risks and decision making; partners may disagree about way business should run

partnership

15

owned by stockholders; usually employ professional managers; owners risks limited to their initial investment; publicly owned corps, shareholders often have very litte influence on business decisions

corporations

16

record, sort, and file accounting information; specialize in various areas of accounting; require at least 1 year of accounting education

accounting clerks

17

supervise work of accounting clerks, perform daily accounting work, and summarize account information; small-med sized business may help interpret accounting information; requires 1-2 years of accounting education and some experience as accounting clerk

book keepers

18

provide accounting, auditing/tax services under direct supervision of accountant; requires 2 year degree/significant accounting/book keeping experience

paraaccountants

19

design accounting information system and focus on analyzing and interpreting information; enterfield with college degree in accounting. many states require 150 credit hours to sit for CPA exam, many also earning masters degree; can achieve professional status as certified public accountant and work for major accounting firms

accountants

20

accountants employed in:

public accounting, private managerial, governmental, and not for profit

21

servies offered to other business by public accountants

auditing, taxation, managment advisory services

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reviewing company books to ensure correct policies and practices have been followed

auditing

23

tax specialists offer advice on tax planning, prepare tax returns and represents clients before governmental agencies

taxation

24

offer advice to other business on a wide variety of managerial issues

management advisory services

25

individual, association/organization that engages in economic activities and control specific economic resources

business entity

26

itmes owned by business that will provide future benefits

assets

27

amount of money owed to business by customers as result of making sales "on account" "on credit"

accounts receivable

28

itmes owed, probable future outflow of assets as result of past transactions/events; debts/obligations of business that can be paid with cash,goods/services

liabilities

29

unwritten promise to pay supplier for assets purchased/services rendered; referred to making a purchase "on account"

accounts payable

30

written promises to pay suppliers/lenders specified sums of money at definite future time

notes payable